Fat profits at financial institutions have led to banker bashing around the world, and China is no exception.
While US and European bankers draw criticism for collecting bonuses despite being rescued by taxpayers, in China it's a different story.
At issue is the relatively low interest rate the mostly state-controlled banks pay to captive depositors. The banks, in turn, lend those funds at much higher rates and pocket the spread, the so-called net interest margin. Last year, that spread at the Big Four state banks averaged 2.5 percentage points.
Because deposit rates are set by the government, smaller players can't compete by offering higher deposit rates, guaranteeing the big banks a secure and low-cost source of funds. Lending rates, in contrast, are open-ended so big banks are free to charge their borrowers as much as they can. Consequently, the banks have become highly reliant on their lending business and its steady margins.
Also fattening profits are their large-scale operations, relatively low overheads and reserves against potential bad loans that are arguably too small, says James Antos, a senior analyst at Mizuho Securities.
Last year, the Big Four - Industrial & Commercial Bank of China, Agricultural Bank of China, China Construction Bank and Bank of China - racked up 623 billion yuan (HK$763.29 billion) in net profit, or 1.7 billion yuan a day. What's more, those banks averaged more than 20 per cent returns on equity, a record, despite being forced to meet tighter capital requirements. By comparison, European banks' return on equity, a key measure of profitability, averaged 5 per cent in 2011.