* ICBC Q2 net profit 69.6 bln yuan vs f'cast 67.1 bln yuan
* BOC Q2 net profit 40.9 bln yuan vs f'cast 38.0 bln yuan
* China's 'Big Four' banks all beat estimates in Q2
By Gabriel Wildau and Lawrence White
SHANGHAI/HONG KONG, Aug 29 (Reuters) - Industrial and Commercial Bank of China Ltd and Bank Of China Ltd both reported better-than-expected second-quarter profit growth on Thursday, as net interest margins held steady while fees rose sharply.
ICBC, the world's largest bank by market capitalisation, posted net profit of 69.6 billion yuan ($11.4 billion) for the second quarter, up 12.5 percent from a year earlier. That beat expectations for 67.1 billion yuan in a Thomson Reuters poll of analysts.
BOC, China's fourth-largest lender, reported quarterly net profit of 40.9 billion yuan, up 17 percent and topping analysts' expectations of 38.0 billion yuan.
The banks join China Construction Bank and Agricultural Bank of China in beating analysts' estimates for the latest quarter, defying the pessimism over the business climate that has weighed on their share prices.
Profit growth at most Chinese banks has slowed this year, as new loan growth has moderated and profit margins face pressure from policy moves to allow banks to offer higher rates on customer deposits.
The China Banking Association said last month it expects net profit growth for China's 17 listed banks to slow to 8 percent in 2013, from 19 percent in 2012.
ICBC set aside 9.8 billion yuan in loan-loss provisions in the second quarter, up from 9.1 billion in the same period last year.
BOC's provisions soared to 14.1 billion yuan in the second quarter, from 3.8 billion yuan in the second quarter last year, a rise of 276 percent.
ICBC's net interest margin, which tracks the spread between the interest rate that banks pay for funds and the rates they charge to borrowers for loans, was 2.57 percent in the first half. The bank did not report its net interest margin in its first-quarter report.
BOC reported its net interest margin at 2.23 percent in the first half, up one basis point from 2.22 percent in the first quarter.
Industry-wide, the average net interest margin rose slightly, to 2.59 percent in the second quarter from 2.57 percent in the first quarter, data from China's banking regulator shows. But that is still lower than the 2.75 percent margin in the fourth quarter.
ICBC made some progress on reducing its reliance on interest income. Fee-based income rose 23 percent in the January-June period, faster than the 5.8 percent rise in interest income.
BOC's fee income also jumped, rising 24 percent to 69 billion yuan.
But in a sign that more loans may turn sour later this year, ICBC reported that overdue loans not designated as non-performing rose to 69.2 billion yuan, or 0.73 percent of all loans, from 0.71 percent at end-2012. ($1 = 6.1202 Chinese yuan) (Editing by Chris Gallagher)