Mainland lenders to show robust profit
Average growth for the banks listed in Hong Kong will be 12 per cent in the third quarter but it cannot beat the buoyant second quarter
China's big lenders are expected to post healthy profit growth for the third quarter compared with a year earlier, but likely to show a sharp fall from the buoyant second quarter as the slowing mainland economy took its toll.
Chinese banks listed on the Shanghai and Hong Kong stock exchanges are due to report their third-quarter results from today.
According to a report by Barclays, the nine Hong Kong-listed mainland lenders are expected to post an average profit growth of 12 per cent from the year-earlier quarter. But profit is anticipated to decline by an average of 7 per cent from the second quarter. By comparison, the banks posted average profit growth of 24 per cent in the second quarter from the year-earlier period.
"We expect profit growth to be relatively stable at big banks," Barclays' analysts wrote.
Profit at the country's Big Four banks - Industrial and Commercial Bank of China (ICBC), Bank of China (BOC), Agricultural Bank of China and China Construction Bank (CCB) - is expected to grow by an average 11 per cent from a year ago, down slightly from a 13 per cent average growth in the second quarter, the Barclays report said.
The average net interest margin, the spread between what banks earn from lending and their funding costs, of Hong Kong-listed banks is expected to drop by three basis points to 2.75 per cent in the third quarter from the second quarter, but the Big Four banks would remain unchanged or up by 1 basis point (one hundredth of a percentage point), the report said.
In a recent report, Macquarie said it expects the nine Hong Kong-listed mainland banks to show 12 per cent growth on average from the year-earlier quarter, but to post a profit decline of 5 per cent, on average, from the second quarter.
The four largest banks and 11 other joint-stock and city commercial banks, including the China Minsheng Banking Corp, Citic Bank and Bank of Beijing, listed in Shanghai are also set to report third-quarter results in late October.
Shanghai-based Shenyin Wanguo Securities forecast that third-quarter profit of 15 Shanghai-listed banks would increase by an average of 10 per cent from a year ago, but would fall by 7 per cent from the second quarter. The brokerage also expects Agricultural Bank of China to outperform rivals with a 24 per cent profit increase in the third quarter from a year ago.
Ni Jun, a banking analyst at Shenyin Wanguo Securities in Shanghai, said the profit growth will continue to slow through the first half of next year.
"The impact of interest rate cuts will continue to weigh on banks' results," he said. "The slowing economy will take a toll on the banks' profit but the effect will lag for six months to one year."
Shenyin Wanguo Securities predicts the non-performing loan ratio will go up by 18 basis points in the third quarter to 1.12 per cent of total loans from the end of the first half, and could reach 1.2 per cent for the full year.
Global rating agency Standard & Poor's also said it expects banks to experience tightening net interest margins and for delinquencies to grow, though not substantially, based on its research of China's top 50 banks by assets.