Industrial and Commercial Bank of China (ICBC) has posted its slowest profit growth in three years, evidence that a sluggish economy is taking a toll on the country's biggest bank by assets.
Net profit rose 14 per cent to 61.3 billion yuan (HK$75.32 billion) year on year, missing Bloomberg's analyst estimates.
Credit Suisse analyst Tao Dong said that even though mainland banks were more willing to lend in the first quarter, demand seemed to be 'uncharacteristically slow'. 'We believe that there is a sea change in China. The constraints to growth have shifted from policy restrictions to demand limitation,' said Tao.
Yang Kaisheng, president of ICBC, said recently that the bank's lending plans this year would be in line with last year's, but that it would lend aggressively to strategic emerging industries, new manufacturing, services and the cultural sector, which spans publishing, media, music and films.
Loans to strategic emerging industries would double compared to last year. Loans to advanced manufacturing would increase to 25 per cent of total loans, and loans to companies in the services sector would rise to more than 20 per cent of total loans this year, said Yang.
The bank's fee income rose 10.4 per cent year on year to 28.6 billion yuan, which was lower than analysts had expected.
Jiang Jianqing, ICBC chairman, said last month that the bank aimed to increase its fee income to become less reliant on loan spread income.
The bank hopes that in 10 years, 40 per cent of its revenue will come from loan spread, 30 per cent from treasuries and 30 per cent from fee and commissions.
The bank's capital adequacy ratio (CAR), which measures capital against risk-weighted assets, dropped 4 basis points to 13.13 per cent. Its core capital, which mostly consists of equity, rose eight basis points to 10.15 per cent.
The balance of non-performing loans (NPLs) dropped by 192 million yuan to 12.8 billion yuan compared to December. The NPL ratio fell 5 basis points to 0.89 per cent.
Meanwhile, Bank of Communications (Bocom), the fifth-largest bank on the mainland by assets, said net profit in the first quarter rose nearly 20 per cent to 15.88 billion yuan from a year earlier.
Bocom's CAR dropped 2 basis points to 12.41 per cent. Its core CAR rose 12 basis points to 9.39 per cent.
The bank's NPL balance fell slightly to 21.89 billion yuan. Its NPL ratio declined by five basis points to 0.81 per cent. The bank's loans grew by 5.58 per cent to 4.88 billion yuan in the first quarter, compared to the end of last year.
Credit quality deterioration eased compared to last year's fourth quarter, bringing down credit costs in general.
The slower growth across the sector was mainly brought on by 'a decelerated interest rate cycle', said Michael Werner, a senior analyst at investment bank Sanford Bernstein, adding that both ICBC and Bocom had weaker-than- expected net interest income.
Mainland banks are expected to extend about 8 trillion yuan of loans this year. The banks lent out 1.01 trillion yuan in March, the most in any month since January 2011.
This, however, masked weak investment since early this year, Credit Suisse's Tao said.
He noted that for the first time ever, increased bank lending had not caused a surge in industrial investment on the mainland.
ICBC's non-performing loans at the end of March, in yuan, down 192 million yuan from December