The Industrial and Commercial Bank of China, the world's largest bank by market capitalisation, said Wednesday it saw net profits rise 36 percent to 110.8 billion yuan (16 billion dollars) in 2008 from the year before.

"In an extremely volatile business environment, the bank continued its vigorous profit growth," it said in a statement to the Hong Kong Stock Exchange.

Bank of China, the nation's top foreign exchange bank, reported late Tuesday its net profit for 2008 rose 14.4 percent to 64.4 billion yuan despite having Asia's biggest exposure to US subprime securities.

The results highlighted dramatically different conditions for Chinese banks compared with their Western peers, some of whom have collapsed under the weight of the worst meltdown in seven decades.

Over the past 18 months, credit conditions among Chinese banks have stood in sharp contrast to other banks globally, according to Richard Lung, a Hong Kong-based analyst with ratings agency Moody's.

"Sheltered by a buoyant local economy, they have enjoyed double-digit profit growth on solid net interest income gains, non-performing loans falling to historic lows and rising capital levels," he wrote in a research note.

The Chinese economy grew by nine percent in 2008, slipping back into single digits for the first time in six years, but still vastly outperforming a Western world in recession.

Chinese banks have even been able to improve the quality of their loan portfolio, notwithstanding government orders to massively boost credit towards the end of 2008 in order to help the economy weather the crisis.

The Industrial and Commercial Bank said its non-performing loan ratio fell to 2.29 percent at the end of 2008 from 2.74 percent a year earlier, the ninth consecutive annual drop, it said.

However, the banks will not be able to escape "collateral damage" from the global economic crisis, Lung argued in his note.

"Demand for the country's exports in its key markets has contracted while economic growth is expected to fall below trend. These factors are depressing an already weak property market, even as interest margins narrow as monetary policy is loosened to stimulate," he said.

The Chinese economy is likely to expand by just 6.5 percent in 2009, the World Bank said recently, significantly below the government target of eight percent.

ICBC Chairman Jiang Jianqing, speaking to reporters in Beijing via a video-link from Hong Kong, warned of a "very difficult situation" in 2009.

"It is basically impossible (to achieve) profit growth of as high as 37 percent every year. But we will try our best to have profit growth (this year) despite the very difficult situation," Jiang said.

Bank of China also warned in the results that "China's economic development still faces significant uncertainties."

"The impact of the current global financial crisis will continue to worsen and further affect the global real economy," it said in its report.

The leaner times probably already started toward the end of last year, analysts argued.

"Since mid-2008, the growth of lending interest income has fallen sharply," said Huang Biao, a Shenzhen-based banking analyst with Guosen Securities, referring to the banking sector as a whole.

"Growth in banks' lending interest income slumped in the third quarter and the drop was even sharper in the fourth quarter, as the macroeconomy slowed sharply in the second half of 2008."

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