Slowdown clips CCB earnings growth
Pressures on economy tell on bottom line, with bank's second quarter bringing weakest profit gain in five quarters, despite half-year record
China Construction Bank, China's second-largest lender, posted a 9.7 per cent rise in net profit for the second quarter, the smallest gain in five quarters, amid a slowing economy. But its net interest margin held steady.
Quarterly profit rose to 60.1 billion yuan (HK$75.5 billion) from 54.8 billion yuan in the same period a year earlier, beating analysts' estimates.
For the first half, profit climbed 12.7 per cent to a record 119.7 billion yuan, driven by an increase in income from lending, and fee and commission services, a filing with the Hong Kong stock exchange said. The Beijing-based lender said in the filing that in the second half of this year, more loans will be allocated for residential mortgages, small and micro-businesses and agriculture-related areas. Fee-based businesses would also be promoted this year, it added.
The bank said it expected the mainland authorities to continue with "proactive fiscal policy" and "prudent monetary policy" for the rest of the year, and that money and credit supply would grow moderately.
The banking industry faced a severe cash squeeze in June as Beijing sent out a signal to lenders to rein in credit expansion. In the first three months of the year, new lending increased by 7.5 trillion yuan, Fitch Ratings said.
CCB is the first of China's Big Four banks to report results for the latest quarter. Agricultural Bank of China, Industrial and Commercial Bank of China and Bank of China are expected to announce their results this week.
Barclays analyst May Yan said in a July 25 research report that mainland bank shares had more upside than downside in the near term. "The upside could be driven by the government's economic 'stabilisation' measures, which could cushion any economic decline," the report said.
Shares in CCB slipped 0.9 per cent to HK$5.79 in Hong Kong trading on Friday. The stock is down 6.9 per cent this year, underperforming the benchmark Hang Seng Index, which has lost 3.5 per cent.
Citi Research raised the target price for CCB shares to HK$7.80 on August 15, compared with HK$7.70 previously. CCB was the least leveraged in the sector and had less off-balance sheet exposures, Citi Research said.
The bank's gross loans and advances to customers rose by 583 million yuan in the first six months, or 7.76 per cent, from the end of last year, bringing total lending to 8.1 trillion yuan.
Non-performing loans in June had risen to 80.3 billion yuan from 74.6 billion yuan at the beginning of the year, the CCB statement showed.
In the first half, net interest income, which contributes three-quarters of the total operating income, rose 10.6 per cent to 187.7 billion over the same period last year.
Net fee and commission income increased 12.8 per cent year on year to 55.5 billion yuan in the first half. Net interest margin, a key measure of lending profitability based on the interest spread between deposit and loan rates, was unchanged at 2.71 per cent.