Not many know that the largest bank in the world, by market capitalization, is not the century-old Citibank, nor its European rivals UBS or HSBC. Riding on the wings of China's galloping stock market, the country's premier banking institution recently surpassed its illustrious peers as the world's largest.

Now, Industrial & Commercial Bank of China Ltd (ICBC), which has a market value of $235 billion, just got a little fatter with record after-tax profit of $9.42 billion in the first half, making it the world's most profitable bank on its loans portfolio.

The bank said in a statement that earnings marked a year-on-year increase of 56.75 per cent during the first six months. ICBC's earning power has already overtaken other global giants; it beat its nearest rival HSBC Holdings Plc whose earnings were $7.72 billion.

"We not only maintained our position as the biggest bank in the world, but also became the most profitable bank in the world," Jiang Jianqing, chairman of the bank, told reporters. "We still have the second half to go so we will continue to work hard.''

Yang Kaisheng, president of the bank, said the group would take a number of measures in the second half of the year in a bid to continue its strong performance. It will try to increase its loan book, he said, continue to improve the yield of its bond investments, and try to maintain a sustainable growth in its net fee and commission-based income.

The biggest profit came on greater fee incomes and better operations. Focusing on domestic lending helped it avoid the risks from the US sub-prime crisis that brought down many of its global peers down to their knees.

"Almost all business loans in ICBC have been growing very quickly," Jiang said. "We have been growing our credit, but at the same time we have also been growing our net fee and commission-based income businesses."

Analysts estimate that the net income of the bank may grow to $17.5 billion this year. They attribute the superior performance to China's corporate tax reforms that took effect this year enabling it to boost profits.

Interestingly ICBC, which held bonds of sub prime crisis-ridden Fannie Mae and Freddie Mac, aggregating $2.7 billion and $651 million was forced to write down $700 on the investment by the end of the second quarter, compared the mortgage-related write-downs of $55.1 billion by Citigroup and $44.2 billion by UBS since the start of 2007.

"ICBC began to sell down those bonds since early this year," Jiang said. "From early this year until now, we have sold $8 billion worth of Fannie and Freddie bonds as well as Alt-A bonds."

Now the world's biggest bank by market value, three years ago it had to be bailed out by the government. It has 16,476 branches in China and 112 outside, its customer base of 170 million customers is equal to the total population of Russia and Canada.

The bank has $1.4 trillion of assets and held $1.21 billion of US sub-prime- related securities at the end of June. ICBC was the biggest national dispenser of insurance policies, mutual funds, government bonds and wealth management products in 2007.

In January 2006 nine months before its initial public offering, American Express, Goldman Sachs Group and Allianz AG who had collectively bought 7.2 per cent in ICBC, have seen a fourfold increase in the value of their investments.

The bank has also diversified into fund management, financial leasing. Insurance related business is on the cards as they have applied for a licence. It also owns over 1,100 premier wealth management centers to serve high net worth customers.

The Chinese lender last year overtook Citigroup Inc. as the world's biggest bank by market value. Its Hong Kong-traded shares are the best performer in the Hang Seng Finance Index. ICBC's Shanghai-traded shares have fallen 41 per cent.

Goldman Sachs Group, Allianz AG and American Express, which bought a combined 7.2 per cent in ICBC in January 2006, nine months before its initial public offering, have seen the value of their investments increase more than fourfold. (See: ICBC shares rise 14.6 per cent post listing)