The profits represented an increase of 8.8 billion yuan (US$1.1 billion) or 21.5 per cent compared with the same period a year ago, the bank said in a statement.

Economists said the increased profits would not only help the bank keep a cleaner balance sheet, but also help it beef up its financial capacity.

"The profits will help it move closer to a final initial public offering (IPO)," said Niu Li, a senior economist with the State Information Centre.

The bank, which won a US$22.5 billion bailout from the State in late December, was chosen by the central government as a pilot institution to test the country's banking reforms.

Last month, it established a joint stock listing vehicle -- China Construction Bank Corporation -- following a split of the institution into two parts.

The joint stock firm, with registered capital of 194.23 billion yuan (US$23.4 billion), has five founding shareholders.

The largest shareholder is the Central Huijin Investment Co, which controls more than 85 per cent.

The other shareholders are Baosteel Iron and Steel Co Ltd, State Grid Corp, Yangtze Power and China Construction Bank Investment Co Ltd.

The joint stock company continues to operate the bank's commercial banking business including its domestic and foreign currency deposits, loans, bank cards and back room operations.

Chinese commercial banks will have to sharpen their competitive edge to be able to compete with foreign banks that can enter the Chinese market without restrictions before the end of 2006, Niu said.

"They will have to lower the rate of non-performing loans, get rid of historical financial burdens and raise their capital adequacy to international standards," he said.

During the first nine months of this year, China Construction Bank wrote off 110.2 billion yuan (US$13.3 billion) of bad assets.

By the end of September, the bank's non-performing loans stood at 83.4 billion yuan (US$10.0 billion) and its bad loans ratio reached 3.74 per cent.

With an aim to replenish its capital base, China Construction Bank plans to issue no more than 40 billion yuan (US$4.8 billion) worth of subordinated bonds. The bonds rank lower in priority in regard to other bank liabilities in terms of claims on bank assets.

After issuing all the bonds, the bank's capital adequacy level is expected to reach more than 8 per cent.

The bank also has plans to usher in foreign investors as equity owners to increase its capital strength, optimize the capital structure and diversify its ownership.

Bank President Chang Zhenming said last month the bank will try to turn itself into a modern share-holding commercial bank to make it a competitive heavyweight in the global financial market within three years.

Chang said his bank will not start the IPO process before the end of this year.

"We are not ready for an IPO," he said. "Market conditions are also not mature."

But the president said the bank will nonetheless actively prepare for that and await better market conditions.

"We will choose the best time," he said, without mentioning a definite timetable and venue.

In August, Bank of China, another bank selected by the central government for the pilot banking reform, reorganized itself into a joint stock company, following the establishment of Bank of China Limited.

The joint stock company, which has a registered capital of 186.39 billion yuan (US$22.5 billion), took control of all of Bank of China's assets, debts, employees and businesses.