December 6, 2022

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

  • China’s Huge Five lenders’ Q1 gains up
  • Margins tumble for four of the banks

BEIJING/SHANGHAI, April 29 (Reuters) – 5 of China’s greatest point out-owned banking institutions have reported larger initially-quarter net profits, aided by a rebound in the country’s economy from the coronavirus pandemic.

But margins – a crucial indicator of profitability for banking institutions – shrank pretty much across the board as these continue to be beneath strain from lower desire fees.

The banking companies have benefited as financial action recovers in China, with the country’s GDP up 18.3% in the very first quarter as opposed to the exact same quarter very last yr. browse much more

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Lending even now tends to make up the bulk of the five banks’ earnings, not like their rivals in the West, many of which have large financial commitment banking and securities trading companies that served to drive big gains in their initially-quarter earnings. examine a lot more

Industrial and Business Financial institution of China Ltd (ICBC) (601398.SS), , the world’s biggest lender by belongings, reported a web financial gain rise of 1.5% in the quarter yr-on-calendar year.

The Lender of Communications Co Ltd (BoCom) (601328.SS), , Agricultural Bank of China Ltd (AgBank) (601288.SS), and Financial institution of China Ltd (BoC) (601988.SS), adopted fit, all logging to start with quarter internet profit rises of extra than 2%. read through additional [

China Construction Bank Ltd (CCB) (601939.SS), , 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. read more

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

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 arrives because of,” reported Qi Wen, Beijing-dependent analyst with the economics and tactic unit of Asian Advancement Bank.

This is very challenging for quite a few banks, primarily the rural business banks, added Qi.

($1 = 6.4674 Chinese yuan renminbi)

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Reporting by Cheng Leng, Zhang Yan and Engen Tham Modifying by Muralikumar Anantharaman and Edmund Blair

Our Requirements: The Thomson Reuters Trust Concepts.