Bank of Communications (BoCom), the mainland's fifth-largest lender, admitted it faces an uphill task to maintain high interest income this year in the face of narrower margins.
The Shanghai-based lender yesterday reported a 19.6 per cent increase in net profit for the first quarter of this year, earning 15.88 billion yuan (HK$19.5 billion).
But the net interest margin, the difference between interest received and paid, decreased 2 basis points from a quarter earlier to 2.6 per cent.
'The margin has already been quite high,' said chief financial officer Yu Yali. 'Our goal is to keep the margin stable this year.'
Interest income accounts for about 80 per cent of mainland banks' total revenue, as they benefit from the regulators' tight grip on interest rates.
But a cyclical slowdown in the mainland economy curbed loan demand and ushered in more deposits, a development likely to narrow the interest margins for the banks.
For the first three months, BoCom's interest income rose 19.5 per cent to 28.37 billion yuan as the net interest margin grew 9 basis points year on year. Its fee-based income jumped 21.9 per cent to 6 billion yuan.