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HONG KONG, April 7 (Reuters) Shares of China Construction Bank (CCB), the country's third-biggest lender, fell nearly 3 percent on Friday, a day after its 2005 results showed disappointing cost control and loan growth in the second half.

Construction Bank, which raised $9.2 billion in China's biggest-ever IPO in October, reported a 4 percent drop in 2005 profit on Thursday as a much higher tax rate cut into earnings.

Annual profit of 47.1 billion yuan ($5.9 billion) was at the high end of analyst expectations, according to Reuters Estimates, but one market watcher said the quality of earnings was weak.

''Our neutral rating on CCB is predicated on its unattractive valuation metrics, ongoing restructuring pressures and execution risks (and) waning scarcity value,'' Merrill Lynch analyst Alistair Scarff said in a research note.

Scarff, who noted that Construction Bank faced rising operating costs and weak loan growth in the second half, said the bank would reap fewer benefits from its tie-up with Bank of America Corp. than rival Bank of Communications Co. Ltd. would get with partner HSBC Holdings Plc.

Bank of America paid $3 billion for a 9 percent stake in Construction Bank last year. HSBC owns 19.9 percent of Bank of Communications, China's fifth-largest lender.

Scarff said Merrill had a clear preference of Bank of Communications over Construction Bank.

Other investors were disappointed with Construction Bank's key non-performing loan ratio, which remains above 3 percent and higher than Bank of Communications.

NPLs are a closely watched figure in China, given the country's long history of inefficient, government-driven lending.

Construction Bank shares have soared more than 50 percent since their October listing, matching a similar rise in Bank of Communications' shares, but the two banks will have much more competition for investor dollars in the coming months.

Bank of China [BOC.UL], the number-two mainland lender, is planning an $8 billion initial public offering for next month while market leader Industrial&Commercial Bank of China [ICBC.UL] wants to raise roughly $12 billion by early 2007.

Construction Bank shares last traded at HK$3.50, down 2.8 percent, while Hong Kong's Hang Seng Index was up 0.6 percent on the day.

REUTERS RA PM1349