China Construction Bank posts slower 9pc gain in first-half profit

Net profit reaches 130.7 billion yuan to meet market target while bad loans expand 12pc

PUBLISHED : Saturday, 30 August, 2014, 1:29am
UPDATED : Saturday, 30 August, 2014, 4:58am

China Construction Bank Corp, the mainland's second-largest lender by assets, raised net profit 9 per cent in the first half, a period marked by decelerating growth in the state banking sector.

The bank said it earned 130.7 billion yuan (HK$164.9 billion) in the six months to June, compared with 119.7 billion a year earlier. The result was roughly in line with analysts' expectations.

Net interest margin, a gauge on loan profitability, rose to 2.8 per cent from 2.71 per cent a year earlier.

The bank's non-performing loan ratio was 1.04 per cent, 5 basis points more than at the end of last year. The volume of bad loans expanded by more than 12 per cent.

"Again, we saw a dual increment in both NPL balance and ratio, but 1.04 per cent is satisfactory compared with the peer average of 1.08 per cent," said Erin Lee, an analyst at Yuanta Securities in Shanghai.

Lee noted that the results were in line with her estimates.

Construction Bank's report was the final mid-year filing from major mainland lenders listed in Hong Kong.

Growth at several banks has slowed markedly since last year. The average rate of growth at the five largest lenders was about 9 per cent, matching the high end of analysts' expectations for the sector, but with a stark year-on-year deterioration.

Construction Bank's pace of growth slowed about 3 percentage points from the 12 per cent in the first half of last year.

Bank of China and Agricultural Bank of China both notched a slight deceleration in profit growth, maintaining the double-digit pace so familiar to the world's most-profitable banking sector.

Agricultural Bank led the state banks in growth with year-on-year net profit expansion of more than 12 per cent.

But the years of ultrahigh growth have drawn to a close for some banks. Industrial and Commercial Bank of China, the largest lender in the world by assets, posted a 7 per cent rise on Thursday, down from 12 per cent a year ago.

Net profit growth at Bank of Communications, the smallest lender among the Big Five, more than halved to just 5.6 per cent. Profit grew 12 per cent in the year-ago period.

Announcing the bank's results earlier this month, Bocom president Peng Chun said the era of breakneck growth for the sector was over.

"The banking sector has entered a single-digit growth era and this means the whole industry is back to normal," Peng said.

China Merchants Bank, the mainland's largest joint-stock bank, reported yesterday net profit jumped 15.9 per cent on the year to 30.46 billion yuan for the first half.

It also posted noted a rapid rise in bad loans, with the non-performing loan ratio at 0.98 per cent, against 0.71 per cent a year earlier and 0.83 per cent at the end of last year. It was a worrying rise of 27 basis points in a year.

China Minsheng Banking Corp posted 25.5 billion yuan in net profit in its interim report, compared with 22.9 billion yuan in the same period last year, beating analysts' expectations.

The impaired-loan ratio increased 8 basis points to 0.93 per cent, at the low end of bad-loan figures for small and medium-sized banks.