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Central Banks

ICBC reports flat quarterly profit growth amid drop in interest income

Agricultural Bank posts modest growth in quarterly profit

PUBLISHED : Thursday, 28 April, 2016, 8:37pm
UPDATED : Thursday, 28 April, 2016, 9:47pm

Industrial & Commercial Bank of China, the world’s largest bank by assets, said its first-quarter net profit rose 0.6 per cent from a year earlier as interest income fell following a series of rate cuts by the Chinese central Bank.

Net profit for the three months ended March amounted to 74.76 billion yuan, (HK$89.55 billion) up from 74.46 billion over the same period in 2015.

The bank said net interest income fell 5.17 per cent compared with the same period of last year to 118.81 billion yuan.

“Under the continuing impact of five interest rate cuts by the People’s Bank of China since 2015,

annualised net interest margin was 2.28 per cent, representing a decrease of 19 basis points from last year,” it said in the result announcement.

ICBC’s total balance of non-performing loans rose 14 per cent from the beginning of the year to 204.7 billion yuan at the end of the quarter.

Bad loans at China’s banks jumped 51 per cent to 1.27 trillion yuan as of the end of 2015, as an economic slowdown resulted in a rising number of defaults.

Meanwhile, Agricultural Bank of China unveiled a 1.06 per cent year-on-year rise in first-quarter net profit to 54.69 billion yuan, as revenue dropped 1.15 per cent to 139 billion yuan.

Non-performing loans (NPLs) stood at 221.6 billion yuan as of March 31, up 4.1 per cent from the end of last year, while the NPL ratio was flat at 2.39 per cent, helped by 4.16 per cent growth in the size of its loan book.

The bank made allowances amounting to 180 per cent of its NPLs, down from 189 per cent at the end of last year.

In an attempt to help the country’s banks struggling with their bottom lines in an economic slowdown, Chinese authorities could loosen regulatory requirements on the bad loan coverage ratio.

Wang Hongzhang, chairman of China Construction Bank (CCB), earlier told Bloomberg News that it would be “reasonable” and “possible” for the banking regulator to set the ratio at 120 to 130 per cent, down from the current 150 per cent.

A higher bad loan coverage ratio translates into a larger amount of capital the banks have to set aside to cover bad loans. The money can otherwise be added to the net profit figure.

The China Banking Regulatory Commission (CBRC) is considering lowering the ratio since the largest state-owned lenders normally have the power to lobby the authorities for policy adjustments.

During the period under review, total assets amounted to 22.88 trillion yuan, representing a 3.03 per cent increase over the end of the previous year.

The annualised return on average total assets and the annualised return on weighted average

equity were 1.33 per cent and 17.12 per cent, respectively.

Meanwhile, China Merchants Bank, the country’s sixth-largest commercial lender by assets said profit for the three months ended March 31 was up 6.56 per cent to 18.35 billion yuan, up from 17.22 billion yuan a year earlier.

Net interest income rose 2.2 per cent to 34.3 billion yuan and net fee and commission income rose 28.3 per cent to 19.8 billion yuan in the period.

The bank said its non performing loans amounted to 53.07 billion yuan at the end of March. The bank’s bad-loan ratio rose to 1.81 per cent from 1.68 per cent at the end of 2015.

Meanwhile, Agricultural Bank of China unveiled a 1.06 per cent year-on-year rise in first-quarter net profit to 54.69 billion yuan, as revenue dropped 1.15 per cent to 139 billion yuan.

Non-performing loans (NPLs) stood at 221.6 billion yuan on March 31, up 4.1 per cent from the end of last year, while the NPL ratio was flat at 2.39 per cent, since its loan book grew 4.16 per cent.

It made allowances amounting to 180 per cent of its NPLs, down from 189 per cent at the end of last year.

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