ICBC and CCB report flat annual profit growth amid surge in bad loans

China’s two biggest banks on Wednesday said they will strengthen risk control to combat rise in non-performing loans

PUBLISHED : Wednesday, 30 March, 2016, 10:11pm
UPDATED : Wednesday, 30 March, 2016, 10:53pm

Industrial and Commercial Bank of China and China Construction Bank, the nation’s two biggest banks, on Wednesday both pledged to strengthen risk control after reporting relatively flat growth in 2015 net profit amid a sharp surge of non-performing loans.

Industrial and Commercial Bank of China, the world’s largest bank by assets, said net 2015 profit rose 0.48 per cent year on year to 277.13 billion yuan (HK$331.8 billion), beating market expectations of 274.50 billion yuan.

The bank’s NPLs jumped 44.19 per cent to 179.52 billion yuan, while the NPL ratio widened to 1.50 per cent, from 1.13 per cent in 2014.

China Construction Bank reported net profit last year rose 0.14 per cent to 228.15 billion yuan, missing market expectations of 231.13 billion yuan.

The bank’s NPL ratio surged 39 basis points to 1.58 per cent, as bad debts soared 46.66 per cent to 165.98 billion yuan.

“Credit risk control is our key task this year, as the credit cost has become our largest cost,” ICBC chairman Jiang Jianqing said in a briefing in Hong Kong, adding that tools like debt-to-equity swaps and assets securitization are to be explored.

Non-performing corporate loans, accounted for 75 per cent of ICBC’s total NPLs. These surged 46.58 per cent from a year back, mostly in manufacturing, wholesale and retail industries.

ICBC has put together a blacklist that identifies potential client risk in terms of excessive inventories, debt, or capacity, aiming to adjust the bank’s loan structure, president Yi Huiman said in a briefing in Beijing.

The bank said it expects to lend more to environmentally-friendly business, the service sector and internet-based companies.

“Compared with peers domestically and internationally, our NPL ratio is at a relatively superior level,’’ Jiang said.

Jiang said Moody’s decision to downgrade the outlook on 25 Chinese financial institutions showed the rating’s agency had misjudged the prospects for China’s banks.

ICBC said its net interest margin had narrowed from 2.66 per cent to 2.47 per cent in 2015, the lowest in at least five years. Jiang said he expects the net interest margin to narrow to 2.27 per cent this year.

Both banks cut their final dividends. CCB proposed a final dividend 27.4 fen per share, down from 30 fen last year. ICBC declared 23.33 fen per share, down 8.65 per cent from 2014 and missing market expectations of 25 fen.