CHINA'S leading banks will likely affirm their lending will remain brisk and be more profitable this year, their immediate capital needs have been met and that souring loans are at manageable levels.

Profits at the 14 listed banks, some of the biggest in the world by market value, are expected by analysts to increase by more than a fifth in 2010 as China's unwinding of its massive stimulus measures helps interest margins recover.

"Rising margins and potential interest rate hikes this year may help banks," said Fan Kunxiang, an analyst at Haitong Securities Co.

Interest margins are expected to rise 10 to 15 basis points to about 2.5 percent this year as China starts to tighten monetary policy, analysts forecast.

The banks include the Industrial and Commercial Bank of China, which has a market value of US$242 billion, the world's biggest for banks, the Bank of China, China Construction Bank and the Bank of Communications.

The banks are also benefiting from China's new lending target of 7.5 trillion yuan (US$1.1 trillion) for 2010, lower than last year's record 9.6 trillion yuan but still strong compared with previous years.

"The steady pace of new lending growth has guaranteed banks' interest incomes," said Chen Xingyu, a Shanghai-based analyst with Phillip Securities Research.

That would be a different picture from last year, which saw interest margins being hit by a series of rate cuts. Analysts estimate banks' net earnings to have risen just 13 percent on average in 2009, the slowest pace since at least 2004.

However, fourth-quarter results for many of the banks are expected to show unusually strong upward blips, as most took provisions at the end of 2008 for offshore assets hit by the global financial crisis, making the year-ago quarter a low base.

"Last year was a particularly bad year for Chinese banks, as low net interest margins hurt profit and offset the benefit of a lending boom," said Fan of Haitong Securities.

China slashed benchmark interest rates five times during the last four months of 2008 to help revive expansion in an economy hobbled by the global financial downturn, pushing down interest margins for banks.