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Don Weinland

Bank of China posted first-half profits above expectations for the sector yesterday but faced rapidly increasing bad debt, a trend analysts say will be reflected throughout the industry as the mainland's biggest banks begin reporting interim earnings.
The bank said net profit rose 11 per cent to 89.72 billion yuan (HK$113.07 billion) from the same period last year.
Analysts projected the mainland's biggest state-owned banks to grow profits between 7 and 9 per cent in the first half.
At BOC Hong Kong (Holdings), which is majority owned by Bank of China, profit attributable to equity holders grew 7.4 per cent from a year earlier to HK$12.08 billion.
Both banks faced rising bad loans, a trend this year that analysts say has already largely been priced into the valuations of the sector.
Earlier this month, the mainland's banking regulator said the non-performing loan ratio for the sector was 1.08 per cent.
"The results [at Bank of China] were in line with market expectations," said Leon Qi, an analyst at Daiwa Securities. "We've already seen the average for non-performing loans in the sector.
"It's known that city commercial banks will have more and the big state banks less."
Bank of China's non-performing loan ratio edged up to 1.02 per cent at the end of June from 0.96 per cent at the end of last year. That represented a 17 per cent increase in the volume of bad loans since the beginning of the year.
Bad loans were concentrated in sectors with overcapacity such as steel and shipbuilding.
The bad loan rate at the five biggest mainland banks is about 1.05 per cent, according to the banking regulator.
Provisions jumped nearly 200 per cent at Bank of China, somewhat higher than expected by Qi. He attributed the rise to the increasing cost of credit.
Bank of China executives much the same alluded to the higher costs of credit in the second quarter of the year.
"Everything is more expensive," Chen Siqing, the bank's president, said at a press conference in Beijing last night. "The assets flowing to the banks have become more expensive."
Overall impaired loans at BOC Hong Kong stayed low at just 0.31 per cent of total lending. However, bad loans from its mainland operations soared compared with the year before. The non-performing loan ratio jumped to 1.58 per cent from 0.61 per cent.
Bank executives said the rapid deterioration of loans on the mainland was concentrated at Nanyang Commercial Bank, in which BOC Hong Kong holds substantial shares. Nanyang has high exposure to the Pearl River and Yangtze River deltas, areas with a high concentration of manufacturing.
Bank of China's growth slowed considerably in the second quarter. Net income increased about 8.5 per cent to 44.4 billion yuan in the April-June period from 40.9 billion yuan a year earlier.
BOC Hong Kong will pay a dividend of 54.5 HK cents per share.
Bank of China shares closed 0.37 per cent lower in Shanghai yesterday, before the results announcement. In Hong Kong, it closed 0.27 per cent firmer. BOC Hong Kong rose 1.2 per cent.


Bank of China beats expectations with 11pc boost in first-half profit

At BOC Hong Kong (Holdings), which is majority owned by Bank of China, profit attributable to equity holders grew 7.4 per cent from a year earlier to HK$12.08 billion. Photo: AFP

Business

Banking & Finance

State-owned bank's 11pc gain in first-half net earnings beats estimates, but jump in non-performing loans reinforces concerns for the sector


Bank of China posted first-half profits above expectations for the sector yesterday but faced rapidly increasing bad debt, a trend analysts say will be reflected throughout the industry as the mainland's biggest banks begin reporting interim earnings.


Bank of China beats expectations with 11pc boost in first-half profit

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}State-owned bank's 11pc gain in first-half net earnings beats estimates, but jump in non-performing loans reinforces concerns for the sector

State-owned bank's 11pc gain in first-half net earnings beats estimates, but jump in non-performing loans reinforces concerns for the sector