Agricultural Bank says annual net profit up 0.7 per cent while non-performing loans inch up to new high

PUBLISHED : Thursday, 31 March, 2016, 10:12pm
UPDATED : Thursday, 31 March, 2016, 10:32pm

Agricultural Bank of China reported Thursday its 2015 annual net profit rose 0.7 per cent to 180.8 billion yuan (HK$217.2 billion), reflecting its weakest performance in a decade.

The bank said non-performing loans reached 2.39 per cent, from the 1.54 per cent level it reported for 2014. The amount of assets now considered non-performing totalled 212.9 billion yuan.

“In 2016, we expect NPLs will still see a small scale increase. But the situation is under control. Our bad debt coverage level at 189 per cent is enough to fight further rises in NPLs,” Agbank’s Director of Risk Management Song Xianping said.

He added that Agbank has a higher lending exposure to rural areas where interest rates have been cut by a sharper 40 basis points in a bid to stimulate activity in regional communities.

Agbank’s big clientele of state-owned enterprises meant that they make lower loan yields on their assets. The bank also has a high cost liabilities structure where it promised guaranteed returns in structured deposits and has a high reliance on interbank funding.

Net interest margins fell by 26 basis points to 2.66 per cent last year. Return on the equity at the bank eased to 16.79 per cent from 19.57 per cent last year.

“As a new employee at Agbank, I have to do more research and studies to give a qualified opinion, ” said Zhao Huan, president of Agbank.

Zhao who joined from lender China Everbright earlier this year, said the bank’s large network of branches, with extensive reach into rural areas, was one of its key strengths.

China floats trial scheme enabling farmers to mortgage their land

Agbank is potential beneficiary from a trial programme to open up access to credit finance within the rural communities. The scheme, unveiled last week, will enable farmers to use their land as collateral for bank loans, potentially enabling the country’s more than 600 million rural residents to tap the credit markets as part of an easing of restrictions on land use and financing

In a related development, Pang Xiusheng, Chian Construction Bank executive vice president, told reporters on Thursday that the bank has accelerated write-offs of bad debts since last year. He expects the nation’s banking regulator to lower the capital requirement to cover bad-debt losses. CCB saw allowances for NPLs ratio shrink to 150.99 per cent in 2015 from 222.33 per cent, close to the minimum of 150 per cent set by China Banking Regulatory Commission.