Minsheng rallies on profit growth

Non-interest income makes up for losses induced by rate cuts and deregulation

PUBLISHED : Thursday, 25 April, 2013, 12:00am
UPDATED : Thursday, 25 April, 2013, 6:15am

China Minsheng Banking, the nation's largest privately owned lender, said net profit surged 20 per cent in the first quarter as strong fee and commission earnings more than offset shrunken profits from making loans.

Net earnings totalled 11.02 billion yuan (HK$13.8 billion) in the January-March period, compared with 9.17 billion yuan in the same period last year, the bank said in a stock exchange filing yesterday.

The profit growth, generally in line with market expectations, was made as the bank stayed focused on "non-state-owned companies, small and micro enterprises, and high-end retail customers", it said.

Minsheng shares rallied 3.79 per cent to 10.13 yuan in Shanghai yesterday and climbed 2.85 per cent to HK$9.37 in Hong Kong.

The 20 per cent profit growth is widely expected to be the fastest among Hong Kong-listed mainland lenders, which will release interim results later this week.

However, it marked a significant slowdown from the 34.5 per cent net earnings increase for the whole of last year, as profits were eroded by two interest rate cuts last year and fiercer competition caused by the moves towards interest rate deregulation.

Net interest margin, a key measure of lending profitability, narrowed 0.15 percentage point over the first quarter to 2.45 per cent, the bank said.

Net non-interest income surged 44 per cent from a year ago to 8.76 billion yuan in the first three months, with its contribution to operating income rising 6.12 percentage points to 30.35 per cent.

The number of private banking customers rose nearly 20 per cent to 11,265 at the end of last month, and assets under management of the private banking business soared 43 per cent to 183 billion yuan, according to the statement.

Loans and advances increased slightly by 3.7 per cent over the quarter, as expansion was reined in by capital adequacy requirements. Capital adequacy ratio was 9.79 per cent and tier-one CAR stood at 7.71 per cent, both lower than forecast by many analysts.

Non-performing loans rose 399 million yuan to 10.9 billion yuan over the quarter. But the NPL ratio remained unchanged at 0.76 per cent, the bank said.

The ratio of allowance to impaired loans was 324.5 per cent at the end of March, up 9.98 percentage points from the end of December.

Mainland banks are faced with mounting default risks from local government financing vehicles, real estate developers and industries saddled with overcapacity, the China Banking Regulatory Commission said earlier this year.