Will China banks be able to compete in their home turf?

Industrial & Commercial Bank of China, the world's biggest by market value, reported profit jump of 61 percent for the first half year, fueled by its loans business.

Net income rose to 41 billion yuan from 25.4 billion yuan from just a year ago, beating the 38.9 billion yuan average estimate. ICBC overtook Microsoft as the third-most valuable company last week.

As of 23rd August ICBC is valued at $282 billion. Microsoft, the world's largest software company, is worth $265 billion and Citigroup, until last month the biggest bank by market value, has a value of $241 billion. Citigroup earned $11.2 billion in the first six months.

Flushed with cash after selling $61 billion worth of shares in the past two years, Chinese banks are expanding their lending business, issuing more credit cards and offering wealth management services in an economy that grew by 11.9 percent in the second quarter. Loan growth in China has averaged 14 percent over the past five years.

ICBC has skirted the fallout from swelling defaults subprime loans that roiled global rivals including HSBC. HSBC will cut jobs and close an office in the U.S. as it retreats from subprime mortgages.

Lending margins have widened as China's central bank boosted its benchmark lending rate for the fourth times this year. Expectations of rising profits from lending have made China's banks the world's most expensive.

ICBC plans to open at least 1,000 wealth management centers this year to battle Citigroup and HSBC for the growing pool of wealthy Chinese. Foreign banks target clients who have at least 500,000 yuan of net assets.

By 2015, the number of affluent Chinese households with annual income exceeding $25,000 will triple to 8.5 million.

Will China banks be able to compete with established international banks to manage the wealth of the discerning rich?