'Too big' ICBC announces slowdown in growth
Bank chief complains of the pressure of being largest lender by assets as net earnings climb
Industrial and Commercial Bank of China's 14.5 per cent net earnings growth last year again made it the world's most profitable bank, though a slowdown in profit growth is set to continue.
Net profit was 238.5 billion yuan (HK$295 billion), beating the 232.4 billion yuan forecast of many analysts, thanks to its control of bad debt. It was the lender's slowest profit growth since the 2008-09 financial crisis.
ICBC, the world's largest bank by market value and assets, plans to slow down asset expansion this year and tolerate a higher bad-loan ratio, underscoring the pressure from stricter capital rules and the anticipation of an economic slowdown.
"It is not so good to be the largest lender by assets," said ICBC's president, Yang Kaisheng. "It reflects China's overreliance on bank loans, and it brings about tremendous pressure for us in risk management and internal control."
In order to change its function from basically "an asset owner" to "an asset manager" and use capital more efficiently, the bank had decided to slow down the expansion of its assets, Yang said.
It aimed to increase total assets by 1.7 trillion yuan this year, or about 9.7 per cent, the bank said in its financial report yesterday. Last year's pace was 13 per cent. The bank also said it would maintain the year-end non-performing loan (NPL) ratio within 1.2 per cent, while the ratio improved 0.09 percentage point to 0.85 per cent over last year.
The balance of NPLs increased 1.56 billion yuan to 74.58 billion yuan over the year, tracking the trend seen in most mainland banks, as economic growth slowed to a 13-year low of 7.8 per cent last year and affected a wide variety of borrowers.
"It will be difficult to realise dual reduction in NPL and the NPL ratio as companies struggle to make transformations amid the economic restructuring," Yang said. "2013 will see lenders' asset quality seriously tested."
Net interest margin (NIM), a key measure of lending profitability, improved 0.05 percentage point to 2.66 per cent last year, but Yang said the ratio would "have some change" this year.
Last year's two interest rate cuts dented lenders' profits. In the first half of this year, the effects will continue to kick in, as ICBC has to reprice 25 per cent of its deposits and 50 per cent of loans, Yang said.
Over the first two months of this year, NIM already dropped 0.04 percentage point, and the decline is expected to continue.
"NIM this year will drop slightly, but the shrinkage will not be astonishingly big," Yang said.
The bank said it would pay a pre-tax 23.9 fen per share dividend. ICBC's shares fell 0.24 per cent in Shanghai trading yesterday before the release of the annual report. Its H-shares rose 0.74 per cent in Hong Kong.