Four major Chinese state-owned banks on Friday reported double-digit growth in their net profits in the first half of the year, thanks to lower loan loss provisions and the country’s steady economic growth.
Postal Savings Bank of China topped the charts with a profit increase of 21.8%, followed by Bank of Communications (Bocom) at 15%, China Construction Bank at 11.4% and Industrial Bank and China Trade (ICBC) at nearly 10%. hundred.
Despite uncertainties surrounding the global economic recovery, the chairman of the Bank of Communications said China’s economic outlook looks bright, which could provide a more favorable environment for bank performance for the rest of the year.
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“While the GDP of the second quarter [gross domestic product] growth has lagged behind market expectations, the overall growth trend stemming from China’s economic recovery has been triggered, “Liu Jun said during the bank’s earnings briefing on Friday.” We have reached a state where the Chinese economy is normalizing against Covid, despite others [external] uncertainties. “
The chairman of the Bank of Communications said that the normalization of the Chinese economy will help support the growth of the banking sector in the second half of the year. Photo: Shutterstock alt = The chairman of the Bank of Communications said the normalization of the Chinese economy will help support the growth of the banking sector in the second half of the year. Photo: Shutterstock
The Chinese economy grew 7.9% in the second quarter, which is lower than analysts’ estimates of 8%.
While analysts generally do not provide profit forecasts for Chinese banks in the first half of the year, data released by the banking regulator indicated that the net profit of six state-owned banks, including Bank of Communications, would increase by 9.2% overall. .
Bank of Communications first-half net profit reached 42 billion yuan (US $ 6.47), up from 36.5 billion yuan a year ago.
The net interest margin, a key indicator of a bank’s profitability, remained stable at 1.55%, while its NPL ratio fell 7 basis points to 1.6%. In the first half of the year, the bank sold 43.7 billion nonperforming loans, 27% more than a year ago.
For the second half of the year, Liu said he expects the bank’s funding costs to improve, in part due to the 50 basis point reduction in the central bank’s reserve requirement ratio, which should be positive for its net interest margin.
Last month, the People’s Bank of China said the reduction in reserve requirements – the amount that banks must hold as reserves at the central bank – will help banks reduce their funding costs by 13 billion yuan per year.
China Construction Bank’s net profit rose 11.4 percent to 153.3 billion yuan from 137.6 billion yuan.
The bank’s bad debt provisions fell 2.8% to 108.3 billion yuan, while its bad debt ratio remained stable at 1.53%.
ICBC announced a 9.9% increase in first-half net profit to 163.5 billion yuan, from 148.8 billion yuan a year ago.
Its net interest margin narrowed to 2.12 percent from 2.2 percent, while its NPL ratio was stable at 1.54 percent.
Net profit of the Postal Savings Bank of China for the fiscal year ended June rose 21.8 percent to 41 billion yuan, from 33.7 billion yuan.
The net interest margin narrowed to 2.37 percent from 2.45 percent, while its non-performing loan ratio fell to 0.83 percent, down slightly from 0.89 percent a year ago.
Chinese banks’ net interest margin will continue to improve in the third and fourth quarters of this year due to rising loan yields, Chen Shujin, a Jefferies analyst, wrote in a recent note.
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