Citic Bank posts flat earnings as peers take flight

Mainland lender's income in holding pattern as it struggles to rise above higher asset impairment losses and operating expenses

PUBLISHED : Friday, 29 March, 2013, 12:00am
UPDATED : Friday, 29 March, 2013, 5:05am

China Citic Bank reported flat earnings for last year, while its Hong Kong-listed mainland peers posted double-digit growth.

Earnings grew by a quarter at China Merchants Bank (CMB) and more than a third at China Minsheng Banking.

Mild growth in revenue at Citic Bank was largely offset by higher asset impairment losses and operating expenses.

Net profit edged up 0.6 per cent to 31 billion yuan (HK$38 billion) from a year earlier. Net profit in the fourth quarter plunged 51.4 per cent from the third quarter to 3.8 billion yuan.

Earnings at the mainland's five biggest banks grew between 12 per cent and 19 per cent last year. Growth in net profit at smaller lenders was well above 20 per cent.

As a result of interest rate liberalisation on the mainland, net interest margin (NIM), the difference of loan income to funding cost relative to interest-bearing assets, is in compression because of competition for loans and deposits among banks. Citic Bank's NIM fell 0.19 percentage point to 2.81 per cent.

"Asset quality deterioration is quite serious for the bank," an analyst said, asking not to be named. Non-performing loans jumped 43.4 per cent to 12.2 billion yuan, and the bank is raising provisions by 51.8 per cent. The bank declared a dividend of 15 fen.

Citic Bank is aiming for about 14 per cent growth in aggregate assets this year. Total assets grew 7 per cent, and deposits grew 14.5 per cent last year.

Net profit at Hong Kong subsidiary China Citic Bank International, by contrast, jumped 10.4 per cent to HK$1.5 billion.

CMB also had more robust results for last year. Net profit jumped 25.3 per cent to 45.2 billion yuan. NIM fell 0.03 percentage point to 3.03 per cent. Non-performing loans jumped 27.4 per cent to 11.6 billion yuan, and the bad-loan ratio rose 0.05 percentage point to 0.61 per cent.

Loan impairment losses rose 4.4 billion yuan to 41.1 billion.

CMB chairman Fu Yuning said increasingly stringent capital controls, gradual deepening of interest rate liberalisation and intensified competition from peers would make the business environment for banks more difficult.

The company declared a final dividend of 0.63 fen.

Meanwhile, net profit at China Minsheng Banking, the mainland's largest privately owned bank, jumped 34.5 per cent to 37.5 billion yuan last year.

Growth of 19 per cent in net interest income and 47 per cent in non-interest income helped Minsheng achieve the highest growth in net profit among its peers.

However, NIM fell 0.2 percentage point to 2.94 per cent, and the capital adequacy ratio fell to 10.75 per cent.

The non-performing loan ratio rose 0.13 percentage point to 0.76 per cent. Total loans grew 15 per cent, and deposits grew 17 per cent.

The bank declared a dividend of 15 fen and said the interim dividend for this year's first half would not fall below 20 per cent of net profit in the period.