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

  • China’s Massive Five lenders’ Q1 income up
  • Margins drop for four of the financial institutions

BEIJING/SHANGHAI, April 29 (Reuters) – 5 of China’s largest state-owned banking companies have noted greater initially-quarter net gains, aided by a rebound in the country’s overall economy from the coronavirus pandemic.

But margins – a vital indicator of profitability for financial institutions – shrank almost throughout the board as these stay beneath tension from small curiosity charges.

The banking companies have benefited as economic exercise recovers in China, with the country’s GDP up 18.3% in the first quarter compared to the very same quarter very last yr. go through far more

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Lending nonetheless tends to make up the bulk of the 5 banks’ earnings, unlike their rivals in the West, several of which have huge investment decision banking and securities trading corporations that assisted to drive big gains in their very first-quarter earnings. examine extra

Industrial and Commercial Lender of China Ltd (ICBC) (601398.SS), , the world’s most significant bank by assets, documented a internet gain rise of 1.5% in the quarter yr-on-12 months.

The Bank of Communications Co Ltd (BoCom) (601328.SS), , Agricultural Bank of China Ltd (AgBank) (601288.SS), and Lender of China Ltd (BoC) (601988.SS), followed suit, all logging first quarter web financial gain rises of far more than 2%. read more [

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 plan arrives thanks,” mentioned Qi Wen, Beijing-based mostly analyst with the economics and technique unit of Asian Growth Bank.

This is really tough for lots of banking companies, specially the rural industrial financial institutions, extra Qi.

($1 = 6.4674 Chinese yuan renminbi)

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

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Amelia J. Bell

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