The development strategy is clearer and the ability of risk control is enhanced. In the first half of 2016, the total rental income and other income of the Bank of China were basically flat year-on-year, reaching 5.54 billion yuan. Thanks to the reduction in interest payments, net profit increased by 9.3% year-on-year to 1.1 billion yuan. The average financing cost was 3.62%, a year-on-year drop of 102 basis points. We expect financing costs to continue to fall slightly to 3.50% this year, mainly due to the diversification of financing channels and the rise in international credit ratings. Moody's Corporation has upgraded the company's rating from A1 to Aa3.
The aircraft leasing business lays the foundation for the potential growth of operating leasing income. Operating leasing income grew 16.7 per cent year-on-year to 2.65 billion yuan in the first half of 2016, mainly due to the strong performance of the aircraft leasing business. Aircraft operating leasing income increased by 15.2 per cent year-on-year to 2.54 billion yuan, accounting for 95.6 per cent of operating leasing income. Of the 14 new aircraft delivered in the first half of the year, 12 were used for operating leases, laying the foundation for the growth of operating leasing income. The net rental yield of operating leasing business reached 8.34%, an annual increase of 0.05 percentage points. We believe that the company's aircraft leasing business still has the potential for rapid growth, and the penetration of overseas markets will also increase. We expect the net rental yield of the company's operating leasing business to reach 8.81%, 9.01% and 9.16% respectively from fiscal year 2016 to fiscal year 2018.
Infrastructure leasing business has expanded steadily, and the ability to control risks has been enhanced. Financial leasing income fell 14.4 per cent year-on-year to 2.67 billion yuan in the first half of this year, mainly due to the narrowing of the net interest margin and the low risk and low yield of new projects. We forecast that financial leasing income will fall 8.5 per cent year-on-year to 5.85 billion yuan in fiscal year 2016, reflecting the projected net interest yield and net interest margin narrowing by 0.04 and 0.07 percentage points to 2.56 per cent and 2.14 per cent, respectively. The management of the company tends to new projects with low risk and low return, which will drag down the profitability of financial leasing, but the level of project risk control will also be improved.
The quality of assets may be at risk of deterioration. The rate of non-performing assets in financial leasing business decreased by 0.76 percentage points to 1.45% compared with the end of 2015, mainly due to the disposal of non-performing assets during the period. At the end of 2016, we expect the rate of non-performing assets to reach 1.99%, mainly because we predict that there is pressure to downgrade the concerned assets to non-performing assets, which increased by 12.2% at the end of the first half of 2016 compared with the end of 2015.
Upgrade to "buy" rating. The company's shares are now trading at 0.91 times the projected price-to-book ratio for fiscal 2017.
Our latest target price is HK $2.19, which is equivalent to 1.06 times the company's forecast price-to-book ratio for fiscal year 2017, and is also the average forecast price-to-book ratio for 2017 fiscal year plus a standard deviation. This is mainly due to the continued increase in the speed of the company's disposal of non-performing assets, and we expect the company's risk control level and overseas market penetration to continue to improve. Upgrade to "buy" rating.