Log in
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Dynamic quotes 
News: Latest News
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors 
All NewsEconomyCurrencies & ForexEconomic EventsCryptocurrenciesCybersecurityPress Releases

China's Big Five banks boost profits, but margins shrink

04/29/2021 | 07:53am EDT
FILE PHOTO: FILE PHOTO: China Construction Bank Corp logo is seen on its headquarters in Beijing

BEIJING/SHANGHAI (Reuters) - Five of China's largest state-owned banks have reported higher first-quarter net profits, helped by a rebound in the country's economy from the coronavirus pandemic.

But margins - a key indicator of profitability for banks - shrank almost across the board as these remain under pressure from low interest rates.

The banks have benefited as economic activity recovers in China, with the country's GDP up 18.3% in the first quarter versus the same quarter last year.

Lending still makes up the bulk of the five banks' earnings, unlike their rivals in the West, many of which have big investment banking and securities trading businesses that helped to drive big gains in their first-quarter earnings.

Industrial and Commercial Bank of China Ltd (ICBC), the world's largest bank by assets, reported a net profit rise of 1.5% in the quarter year-on-year.

The Bank of Communications Co Ltd (BoCom), Agricultural Bank of China Ltd (AgBank), and Bank of China Ltd (BoC) followed suit, all logging first quarter net profit rises of more than 2%.[

China Construction Bank Ltd (CCB), on Wednesday, also produced higher earnings for the quarter.

However, net interest margins shrank at four of the five banks partly resulting from reforms by the central bank to lower the benchmark loan interest rate.

AgBank did not disclose its first quarter net interest margin, the difference between what banks pay on deposits and earn on loans.

Chinese banks have begun to pull back on lending, amid Beijing's worries about exuberance in some sectors such as property.

The banking regulator has fined lenders for instances where borrowers have funnelled loans meant for other purposes into property.

Industry regulator CBIRC said earlier this month that China's banking industry recorded a 1.5% year-on-year profit growth in the first quarter, while the bad loan ratio dropped to 1.89% in Q1 from 1.92% at the end of 2020.

CCB and ICBC posted flat non-performing loan ratios from the end of the prior quarter, while the other three logged slight falls.

Analysts, however, said that China's banks face a spike in NPLs once a government-mandated grace period for calling in soured debt expires at the end of this year.

"We would expect a significant increase in the NPL [ratio] when this policy comes due," said Qi Wen, Beijing-based analyst with the economics and strategy unit of Asian Development Bank.

This is very challenging for many banks, especially the rural commercial banks, added Qi.

($1 = 6.4674 Chinese yuan renminbi)

(Reporting by Cheng Leng, Zhang Yan and Engen Tham. Additional reporting by Gabriel Crossley. Editing by Edmund Blair, Muralikumar Anantharaman and Jane Merriman)

ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
AGRICULTURAL BANK OF CHINA LIMITED -0.68% 2.9 End-of-day quote.-7.64%
AGRICULTURAL BANK OF CHINA LIMITED -1.15% 2.57 End-of-day quote.-9.51%
BANK OF CHINA LIMITED -0.37% 2.71 End-of-day quote.2.26%
BANK OF CHINA LIMITED 0.34% 2.99 End-of-day quote.-5.97%
BANK OF COMMUNICATIONS CO., LTD. -0.87% 4.56 End-of-day quote.11.22%
BANK OF COMMUNICATIONS CO., LTD. 0.23% 4.31 End-of-day quote.-3.79%
INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED -0.69% 4.31 End-of-day quote.-14.31%
Latest news "Economy & Forex"
08/06China's NDRC vice chair says economy growing steadily but recovery unbalanced
08/06Fiscal stimulus 'more appropriate' tool to blunt virus hit - RBA governor
08/06China pboc expected to set yuan mid-point at 6.4625 per dollar - reuters estimate
08/06FACTBOX-CBO estimate leaves U.S. budget shortfall for infrastructure bill backers
08/06UK starting salaries rise by record amount as jobs squeeze tightens - REC
08/06South Korea's Kakao Bank shares debut 38% above IPO price
08/06Japan's household spending unexpectedly falls as firms cut bonuses
08/06U.S. Senate works to finish $1 trillion infrastructure bill
08/06Apple to check iCloud photo uploads for child abuse images
08/06Japan's nikkei average futures up 0.47% in early trade
Latest news "Economy & Forex"