China’s top banks report interim profit growth

Beijing/Shanghai — Two of China’s top bankers on Monday warned of pressure on net interest margins — a gauge of bank profitability — even after the country’s five largest lenders posted robust first-half results.

China Construction Bank Corporation’s (CCB) “margin will keep narrowing to the end of this year”, said the bank’s CFO Zhang Yi.

Meanwhile, Bank of China (BoC) expects net interest margins (NIM) to “still face a certain downward pressure,” said vice- president Wang Wei.

The comments come after five of China’s top banks, including CCB and BoC, posted robust half-year net profit growth on Friday and Monday.

AgBank posted 12.4% growth in first-half profits, while BoC posted an 11.8% increase over the same period, the biggest jumps since 2014 and 2013 respectively, as business activity recovers from the Covid-19 pandemic.

The results are in the same vein as those from Industrial and Commercial Bank of China, Bank of Communications and China Construction Bank Corporation, all of which reported more than 9% first-half net profit growth on Friday.

Both AgBank and BoC reported stable bad loan growth.

BoC logged a non-performing loan ratio of 1.3% at the end of June, the same as at the end of the first quarter. AgBank’s non-performing loan ratio edged down slightly to 1.5% from 1.53% over the same period. BoC, though, which is the most international of the five banks, said it expected soured debt to grow more offshore than onshore.

“New non-performing loans abroad are mainly concentrated in industries such as real estate and aviation that are continuously affected by the epidemic,” said BoC chief risk officer Liu Jiandong.

At BoC, NIM fell to 1.76% at the end of June from 1.8% at the end of the previous quarter. AgBank did not disclose its NIM.

Reuters