China Construction Bank (CCB), the second-largest mainland lender by assets, reported slower profit growth than its mainland peers in the third quarter as China's weaker economy resulted in more bad debts and fewer sales of investment products.
The bank reported yesterday that its July to September quarter net profit stood at 51.91 billion yuan (HK$63.94 billion), up 12.4 per cent from 46.2 billion yuan a year earlier.
The results were in line with market estimates but lagged more buoyant earnings reported by two of its peers last week.
Bank of China (BOC) reported its profit rose 16.6 per cent in the third quarter, while Agricultural Bank of China (ABC) said its earnings grew 16 per cent.
"CCB has made more corporate loans than BOC and ABC, and as many exporters and companies are hard hit by the mainland and global economic slowdown, the bad debt has increased so it is natural to see its profit growth" trail the other two lenders, said Louis Tse Ming-kwong, director of VC Brokerage.
"CCB's share price is likely to come under pressure in the near term as investors may shift to other mainland banks that reported a better result," Tse said.
"Looking ahead, the asset quality of its corporate lending would be the key issue to determine its future profit growth."
The group's loan loss reserves increased by 21 per cent to 8.38 billion yuan from the year-earlier third quarter. Its non-performing loans at the end of September stood at 72.95 billion yuan, up 2.03 billion yuan from the end of last year.
Poor sales of investment products produced lower fee and commission income, which stood at 21.4 billion yuan in the third quarter, down 2.37 per cent from a year earlier.
CCB in the second quarter reported its smallest half-yearly profit growth since 2009 as a regulatory crackdown on certain bank charges eroded fee income.
Net trading gain also fell 30 per cent to 621 million yuan in the third quarter.
CCB's interest income, which is the key driver of growth, stood at 152.73 billion yuan, up 23 per cent from a year earlier. This was, however, offset by strong growth in interest expense, which increased 29 per cent year-on-year in the third quarter, resulting in net interest income rising 18.15 per cent to 91.33 billion yuan.