SHARES in the banking sector surged yesterday, bolstered by CITIC Bank and China Merchants Bank more than doubling profits forecasts for the first half of the year.

All listed banks rose yesterday with Beijing-based CITIC Bank up 7.27 percent to 5.61 yuan (82 US cents).

The benchmark Shanghai Composite Index rose 4.59 percent to 2,792.40.

CITIC Bank said it expected its first-half profits to soar 150 percent over a year ago. The bank's profits in the first half of last year sat at 3.21 billion yuan.

CITIC Bank said it had kept the bad loan ratio less than 1.45 percent with provision against non-performing loans topping more than 115 percent.

CITIC Bank is the lastest to report a major growth in profit on the back of tax cuts and widening interest spread.

Merchants Bank said it expected its first-half net profit to be at least double that of a year ago.

It translated into a first-half profit of at least 12.2 billion yuan, or 0.83 yuan earnings per share.

Shenzhen-based Merchants Bank ended at 22.67 yuan yesterday, up 6.48 percent.

The tight monetary policy this year led to limited lending resources and helped shore up interest rates.

China unified the corporate tax rate on domestic and overseas players to 25 percent this year while previously domestic companies faced a nominal rate of 33 percent.

Last week, Industrial and Commercial Bank of China and Shanghai Pudong Development Bank also reported rising profits for the first half.

Pudong Bank said its net profit would grow at least 140 percent from 1.55 billion yuan a year ago. ICBC, the country's biggest lender, said its first-half profit will grow more than 50 percent.