ADVERTISEMENT

ADVERTISEMENT

China's top banks book slowest Q3 profit growth in 3 years as bad loans rise

SHANGHAI/BEIJING - China's top five banks are seeing their slowest third-quarter profit growth in at least 3 years, as the sluggish economy forces lenders to set aside capital for more bad loans and successive interest rate cuts shave margins.

2049518+BusinessNews.jpg

SHANGHAI/BEIJING - China's top five banks are seeing their slowest third-quarter profit growth in at least 3 years, as the sluggish economy forces lenders to set aside capital for more bad loans and successive interest rate cuts shave margins.

State-owned Industrial and Commercial Bank of China Ltd (ICBC) reported near-flat profit growth on Friday while Bank of Communications Co Ltd (BoCom) reported a slight dip.

China's three other big banks - Bank of China Ltd (BOC) , Agricultural Bank of China Ltd (AgBank) and China Construction Bank Corp (CCB) - also saw near-flat profit growth in third-quarter results reported earlier this month.

The People's Bank of China has cut interest rates six times in less than a year, squeezing commercial banks' net interest margin (NIM), or the difference between income from lending and the cost of funding. The central bank has also scrapped the ceiling on bank deposit rates.

"The interest rate cuts, in conjunction with the rate liberalization will pressure the banks' profitability because their deposits are usually repriced more slowly than loans," Moody's said in an October report.

ADVERTISEMENT

As China heads for its slowest economic growth in a quarter-century, borrowers struggling with sluggish demand for their goods and services are finding it hard to repay loans.

Consequently banks are seeing non-performing loans (NPL) rise and are revaluing an increasing volume of impaired assets.

ICBC's NPL ratio was 1.44 percent at the end of September from 1.4 percent at the end of June, while BoCom's ratio increased to 1.42 percent from 1.35 percent. CCB, AgBank and BoC also reported higher NPL ratios.

All five of China's largest commercial lenders reported a sharp increase in impairment losses on assets and are setting aside more capital.

ICBC's impairment losses on loans and advances to customers hit 61.25 billion yuan ($9.69 billion) in the first nine months of the year, up 90 percent from the same period a year earlier.

At BoC, impairment losses on assets increased by 14.88 percent in January-September, while CCB reported a 62.65 percent increase.

What To Read Next
This week on AgweekTV, we hear about North Dakota corporate farming legislation and about WOTUS challenges. Our livestock tour visits a seedstock operation and a rabbit farm. And we hear about new uses for drones.
Kevin and Lynette Thompson brought TNT Simmental Ranch to life in 1985. Now, their daughter, Shanon Erbele, and her husband, Gabriel, are taking over the reins, and their sale is for Feb. 10.
Gevo will be making sustainable aviation fuel in Lake Preston, South Dakota. Summit Carbon Solutions plans to capture carbon emissions from the facility.
Even if it's not a lucrative venture, the hobby of raising rabbits continues at this farm near Sebeka, Minnesota.