Shanghai's banking industry reported a combined pre-tax profit growth of 66.2 percent in 2007 and regulators urged more innovation to cut the levy on lending.

The industry raked in a combined pre-tax profit of 66.99 billion yuan (US$.9.32 billion) last year as lending and personal wealth management products boomed, the Shanghai headquarters of the People's Bank of China said.

Chinese banks reported a profit increase of 68.7 percent last year, outpacing their overseas rivals' 32.4-percent rise, the central bank said.

Banks should quicken the pace of innovation and offer more new products and new services to diversify profitability, the central bank said. They should boost efforts to cut the proportion of lending assets and increase non-loan business and non-interest rate income, the statement said.

At present, about 70 percent of banks' income originated from their lending business while overseas banks earned 50 percent of their revenue from loans.

Last year's booming stock market also offered banks a platform to sell related financial products, such as those bidding for new shares and others under the qualified domestic institutional investors scheme where banks pool clients' money to invest in overseas capital markets.

The central bank also said that while lenders in Shanghai should follow a tight monetary policy by capping their lending scale, they should also at the same time grant loans to small- and medium-size players and firms engaged in environmental protection.

(Shanghai Daily February 13, 2008)