ICBC’s net profit for third quarter falls 0.07pc to 72.8 billion yuan

PUBLISHED : Friday, 28 October, 2016, 6:11pm
UPDATED : Friday, 28 October, 2016, 8:50pm

The Industrial and Commercial Bank of China said its net profit for the third quarter ending September 30 fell 0.07 per cent year on year to 72.8 billion yuan as the bank saw a large drop in income from lending compared to a year ago.

“The government has been pressuring banks to cut fees in multiple lines of services this year. The bank’s pre-provision level for operating profits was affected,” said Shujin Chen, research director at DBS Vickers. “Both net interest margins and fee revenues at ICBC have been under negative growth this year.

ICBC said its net profit for the nine months ending September edged up 0.53 per cent year on year to 223.5billion yuan. Net interest income for the nine month period was down 7.5 per cent to 351.4billion yuan, while fees and commissions rose 2.3per cent to 113.7billion yuan.

Meanwhile, the latest non-performing loans ratio at the bank stands at 1.62 per cent, up from the 1.55 per cent at the end of June this year.

“If ICBC could begin to show it is stabilising on its level of non-performing loans formation, we could probably start to confirm the thesis that we are to see a peak on the non-performing loans issue in the banking industry next year,” Chen said.

The central bank has been using price measures to change banks’ behaviour
Shujin Chen, DBS Vickers

Last week, mainland media reported that ICBC had been penalised by having points deducted from its Macro-Prudential Assessment System score by the People’s Bank of China for failing to meet the minimum 150 per cent coverage ratio for cash reserves that banks must set aside for bad loans. ICBC declined to comment on the matter when contacted by the South China Morning Post.

In the latest results, ICBC said its coverage ratio is now at 136.14 per cent, a significant drop compared to the 143 per cent level report at the end of June.

“We can’t say it was really a deduction. The central bank has been using price measures to change banks’ behaviour. But the price impact has not been especially strong,” Chen said.

“Compared to the central bank, the China Banking Regulatory Commission could be more concerned about the provisions level. It does not have a very clear guidance on the matter [when banks drop below the required ratio],” she added. ICBC could see its product launches suspended by the CBRC as a possible penalising measure, Chen said.

This story has been amended to correct the percentage of net profit decline in the third quarter from the year-earlier period. The headline has also been amended to reflect the correct figure.