The Bank of Communications, China's fifth largest bank, said its net profit rose 42.7 percent year on year to reach 2.9 billion yuan (362.5 million U.S. dollars) in the first quarter, thanks to revenue growth from interest.

The bank's quarterly report said the country's fast economic growth, brisk capital market and the hike of the one-year loan interest rate by the central bank in April have all contributed to providing a favorable development environment for the sector.

The bank's chief financial official Yu Yali believes the hike of the one-year loan interest rate from 5.58 percent to 5.85 percent will slow down the pace of loan granting by commercial banks.

However, he said he didn't think the upward adjustment of the loan interest would have a negative impact on the bank's profit as the gap between the deposit interest rate and loan interest rate was further widened.

Currently, the one-year deposit interest rate stands at 2.25 percent.

Meanwhile, the bank missed out 84 million yuan in revenue in the first quarter due to the appreciation of the Chinese currency, the Shanghai Securities News quoted Yu as saying on Wednesday.

China adopted a more flexible foreign exchange policy in July last year by pegging its currency to a basket of currencies.

On May 15, the yuan's daily benchmark, or central parity, rose to 7.9982 against the U.S. dollar, breaching, for the first time, the psychological barrier of eight yuan. It has since moved above eight yuan.

Source: Xinhua