ICBC profit climbs 10.2 per cent on fees, high net interest margins

Bank still sees challenges ahead as it boosts liquidity and interest rate pricing management while striving to control liability costs

PUBLISHED : Friday, 28 March, 2014, 1:40am
UPDATED : Friday, 28 March, 2014, 2:01am

Industrial and Commercial Bank of China (ICBC), named last year as the world's most profitable bank, said its net profit rose 10.2 per cent to 263 billion yuan (HK$331.5 billion) in 2013, thanks to high net interest margins and its fee-based businesses.

The bank's net interest margin, a gauge of lending profitability, stood at 2.57 per cent last year, 9 basis points lower than 2012, but still higher than its peer Bank of China, whose net interest margin was 2.24 per cent.

Last year, ICBC generated 443 billion yuan in net interest income, an increase of 6.1 per cent over 2012.

The bank's net fee and commission income reached 122 billion yuan, up 15.3 per cent.

Beijing's urbanisation plan would provide major opportunities for the bank this year despite a slowdown in the country's economy.

"[The] large demand for financial services stimulated by accelerated new urbanisation will bring great opportunities for our business expansion," said ICBC in its earnings statement.

ICBC plans to step up overseas operations at a time when the yuan accelerates its inter- nationalisation as a global currency.

The bank acknowledged though that there will be challenges ahead.

"[We] reinforced liquidity management and interest rate pricing management, strived to control liability costs and achieved stable growth in net interest income," said ICBC.

Another key issue for ICBC might come from internet finance.

"[We] will also steadily promote IT-based banking development, explore ways to apply the big data technology, and expedite the building of a modern information platform meeting transformation and development demand," the bank said.

The bank's net income in the fourth quarter went up to 57.1 billion yuan from 52.9 billion yuan a year earlier beating the 56 billion yuan average estimate of 28 analysts surveyed by Bloomberg and the average estimate of 52.5 billion yuan made by 10 analysts polled by Thomson Reuters.

ICBC's non-performing loan ratio rose 9 basis points to 0.94 per cent last year.

The bank said this was mainly because of operating difficulties by some small and medium-sized enterprises given the shaky economic environment and weak external markets.

The Yangtze River Delta, the Pearl River Delta and the Bohai Rim were the main regions that saw relatively large increases in non-performing loans.

ICBC is the third of China's Big Four banks to report its earnings so far. Its shares closed down 0.2 per cent to HK$4.62 yes- terday.