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Three of China's top banks post robust H1 profits, bad loans fall

Three of China's top banks post robust H1 profits, bad loans fall

FILE PHOTO: The logo of Industrial and Commercial Bank of China (ICBC) is pictured at the entrance to its branch in Beijing, China April 1, 2019. REUTERS/Florence Lo

SHANGHAI/BEIJING :Three of China's largest banks posted more than 9per cent first-half net profit growth on Friday as bad loans fell in a sign that the lenders are recovering from the COVID-induced hit they took last year.

The results are a far cry from those of last year when the country's top lenders reported their biggest profit falls in at least a decade at the end of the first half. They compare with a 4-5per cent rise in net profit reported by the three banks in the same period in 2019 before the pandemic hit.

The zero tolerance approach to COVID-19 means China has been able to maintain a relatively high level of commercial activity, even as repeated lockdowns grip other parts of the world.

As a result, China's largest banks saw easing risks of bad loans and less pressure from regulators urging banks to lower commercial interest rates to businesses as they did last year during the height of the pandemic.

Industrial and Commercial Bank of China (ICBC), the world's largest commercial lender by assets, said its net profit rose 9.87per cent in the first half of 2021 from the same period last year in a statement to the Hong Kong Stock Exchange on Friday.

Following suit, China's Bank of Communications Co Ltd (BoCom), the country's sixth-largest lender by assets, posted a 15.1per cent increase in first-half net profit.

Also on Friday, China Construction Bank Corp (CCB), the country's second-largest lender by assets, posted a 11.39per cent rise in first-half profit.

All three lenders reported a slight fall in non-performing loan (NPL) ratios, with ICBC saying its NPL ratio dipped to 1.54per cent at the end of June from 1.58per cent at the end of the first quarter.

BoCom reported a 1.6per cent NPL ratio at the end of the first half, compared to 1.64per cent at the end of the previous quarter, while CCB's fell to 1.53per cent from 1.56per cent over the same period.

Chinese commercial banks overall posted a 11.1per cent increase in first-half net profit to 1.1 trillion yuan, according to data from the China Banking and Insurance Regulatory Commission (CBIRC).

By the end of the second quarter, the average non-performing loan ratio for commercial banks was at 1.76per cent, the CBIRC data showed, falling for the third consecutive quarter.

BoCom said its net interest margin - a key indicator of bank profitability - inched up to 1.55per cent at the end of June, from 1.54per cent at the end of March, while ICBC saw a slight fall to 2.12per cent from 2.14per cent over the same period.

CCB's NIM remained steady from the end of March to end-June at 2.13per cent.

UNCERTAIN TIMES

Analysts and bankers cautioned that the current lack of global stability could impact how China's banks fare in the second-half.

"The unsynchronized pandemic prevention and control in the world, uneven economic recovery, increased expectations in monetary policy reorientation in major global economies," will all impact China’s banking sector, said ICBC in its annual report.

Analysts also highlighted the impact that domestic regulation could have on credit. In an August note, Morgan Stanley said credit growth could weaken more in the second half with policy tightening on 80per cent of credit demand in China, including property-related loan demand.

"The original assumption of robust recovery from COVID may need to be reviewed given the macro situation," said Moody's banks analyst and vice president Nicholas Zhu.

Banks "will need to be nimble and adaptive in the second half of the year".

(US$1 = 6.4791 Chinese yuan renminbi)

(Reporting by Zhang Yan, Cheng Leng and Engen Tham; Editing by Kirsten Donovan, Kim Coghill and Emelia Sithole-Matarise)

Source: Reuters

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