Big Five lenders - Industrial and Commercial Bank of China (ICBC),
China Construction Bank Corp (CCB), Agricultural Bank of China (AgBank),
Bank of China (BoC), and Bank of Communications Co (BoCom),
reported quarterly earnings on Thursday and Friday.
Their net interest margins (NIMs) - the difference between
interest paid and earned - slipped, as the country's economy
grows at its slowest pace in a quarter century.
NIMs, a key gauge of bank profitability, continued to fall
across the board in the wake of Beijing's six successive
benchmark interest rate cuts in 2014-15.
ICBC, the world's largest lender, reported on Friday NIM of 2.12
percent at end-March, compared to 2.16 percent at end-December.
NIM compression was also felt keenly at BoCom, which saw NIM
droop to 1.57 percent at end-March, it's lowest since at least
NIMs at BoC, AgBank and CCB also showed a similar trend and were
at their lowest levels since 2011-2012.
As margins shrank, profit growth at all five lenders remained
near flat, although CCB outperformed its contemporaries with a 3
percent rise in first-quarter net profit.
And the margin slide is likely to continue this year.
The president of BoC said in March that increasing interest
income this year will be "impossible".
The news around bad debts was more cheerful, though, with some
of the lenders showing a decline in their non-performing loans (NPLs)
While CCB and BoCom reported unchanged bad loan ratios from the
quarter before, BoC, AgBank and ICBC all reported a slight fall
The arrest of the rise in non-performing loan ratios may be a
sign that the measures China's banks have adopted to fight
soured debt - from increasing their volume of write-offs to
using Beijing-led debt-for-equity swaps for large struggling
state-owned-enterprises - are working.
But the struggle this year is not over as analysts predict added
pressures from a cooling economy.
"A lot of structural adjustments to the economy will put
pressure (on banks)," said Richard Cao, a banks analyst at
Guotai Junan Securities (HK).
(Reporting by Shu Zhang and Matthew Miller; Writing by Engen
Tham; Editing by Stephen Coates and Muralikumar Anantharaman)
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