Chinese bank profits crimped by slowdown

Several big mainland banks saw profit growth slow in the third quarter, as they grappled with an increasing number of soured loans and a narrowing of the interest spread in the world's second-largest economy.

Third-quarter net earnings at Industrial and Commercial Bank of China, the world's largest lender by assets, rose 7.72 per cent year on year to 67.3 billion yuan (HK$85.6 billion), the bank said yesterday. That was weaker than the 68.7 billion yuan expected by many analysts, and a significant slowdown from the 12.5 per cent increase in the second quarter.

ICBC's non-performing loan ratio rose to 0.91 per cent from 0.87 per cent. Interest income increased by just 4.1 per cent, but gains from fees and commissions rose a robust 13 per cent.

Mainland banks are having to cope with the challenges brought by the "economic slowdown, accelerated interest rate liberalisation and stringent capital constraints", Bank of Communications said yesterday.

The mainland's fifth-largest lender saw net profit growth slow to 3.43 per cent year on year in the third quarter, missing analysts' forecasts by a large margin, as impaired loans climbed 21 per cent.

Bocom's non-performing loan ratio edged up 0.02 percentage point to 1.01 per cent and the loan amount rose by 850 million yuan to 32.55 billion yuan over the quarter. Net interest margin fell to 2.53 per cent from 2.56 per cent, it said.

"Profits of mainland banks generally slowed down from the second quarter to reflect the impact from the cash squeeze at the end of June," said Qiu Guanhua, an analyst at Guotai Junan Securities.