Agricultural Bank of China

Agricultural Bank on target with 14.5pc profit jump

Agricultural Bank records slowest growth in profit since listing as credit tightens on the mainland and is mulling ways to raise capital

PUBLISHED : Wednesday, 26 March, 2014, 5:29am
UPDATED : Wednesday, 26 March, 2014, 5:29am

Agricultural Bank of China, the mainland's third-largest lender in terms of market capitalisation, saw the slowest profit growth since its 2010 listing but last year's results were in line with market expectations, with slightly improved credit quality and a more or less stable lending margin.

Net profit rose 14.5 per cent from 2012 to 166.2 billion yuan (HK$207.8 billion), with fourth-quarter earnings falling 38.1 per cent quarter on quarter to 28.2 billion yuan because of slower credit growth on the mainland.

The consensus analysts' estimate compiled by Bloomberg was for annual growth of 14.4 per cent.

"Agricultural Bank may continue to report lower earnings in the coming quarters as curbs on lending on the mainland continue this year," said Kenny Tang Sing-hing, a general manager at AMTD Financial Planning.

The bank was the first of the mainland's Big Four to announce annual results this week. The other three are expected to report their slowest profit growth since the global financial crisis in 2008 amid shrinking margins and surging bad-loan write-offs.

Bank of China reports today, Industrial and Commercial Bank of China tomorrow and China Construction Bank on Friday.

Agricultural Bank vice-president Li Zhenjiang said the lender would consider issuing preference shares to raise its capital when the rules governing issuance by banks were laid out by the China Banking Regulatory Commission.

"We have been listed for more than three years and have not tried to raise any capital," Li said in Hong Kong yesterday. "But we've got some [downward] pressure on our capital so we will consider some new ways to boost our capital strength."

The bank's capital adequacy ratio stood at 11.86 per cent at the end of last year, down from 12.61 per cent a year earlier.

The China Securities Regulatory Commission launched a pilot programme last week allowing eligible listed and unlisted public companies to issue preference shares.

Agricultural Bank's net interest margin, a gauge of lending profitability, fell 0.02 percentage point to 2.79 per cent.

The property development sector and industries plagued with overcapacity have seen a tightening of credit on the mainland, but Tang said Agricultural Bank, more focused on farms and smaller firms, could be less affected by such a policy.

Customer loans and advances grew 13 per cent, with the growth of loans to small and micro enterprises 11.6 percentage points higher than the average, the bank said.

It bad loan ratio improved by 11 basis points to 1.22 per cent, with outstanding bad loans rising 1.9 billion yuan to 87.7 billion yuan. The balance of special mention loans, which are more vulnerable to become bad loans, amounted to 276.3 billion yuan, a drop of 19.1 billion yuan.

Shares in the bank fell 0.31 per cent to close at HK$3.20 before the results were announced. The stock has fallen 13.5 per cent in the past six months but is still the second-best performer among the Big Four.