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

BEIJING/SHANGHAI, April 29 (Reuters) – 5 of China’s largest point out-owned banking companies have reported greater to start with-quarter web gains, assisted by a rebound in the country’s financial system from the coronavirus pandemic.

But margins – a crucial indicator of profitability for banking companies – shrank nearly across the board as these stay under tension from low interest fees.

The financial institutions have benefited as financial activity recovers in China, with the country’s GDP up 18.3% in the very first quarter versus the identical quarter very last year. browse extra

Lending nonetheless can make up the bulk of the 5 banks’ earnings, contrary to their rivals in the West, several of which have large financial investment banking and securities trading businesses that served to generate huge gains in their to start with-quarter earnings. read additional

Industrial and Business Bank of China Ltd (ICBC) (601398.SS), , the world’s greatest bank by assets, noted a web financial gain increase of 1.5% in the quarter year-on-12 months.

The Financial institution of Communications Co Ltd (BoCom) (601328.SS), , Agricultural Bank of China Ltd (AgBank) (601288.SS), and Lender of China Ltd (BoC) (601988.SS), followed fit, all logging to start with quarter net financial gain rises of far more than 2%. study much 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 coverage arrives due,” reported Qi Wen, Beijing-primarily based analyst with the economics and tactic device of Asian Advancement Financial institution.

This is very challenging for quite a few banking companies, particularly the rural commercial banking companies, extra Qi.

($1 = 6.4674 Chinese yuan renminbi)

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

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