Chinese banks feel pinch from falling interest income
State-owned banking giants likely to deliver disappointing results for 2016 but bad-loan problems show signs of improvement
China’s large state-owned banks are expected to disappoint when they report earnings for 2016 this week, according to analysts.
Of the Big Five state-owned banks, Agricultural Bank of China is expected to post the largest profit decline, of 2 per cent, to 177.3 billion yuan (US$25.8 billion), according to a poll of 21 analysts by Bloomberg. This will mark the lender’s first earnings drop since 2010.
Industrial and Commercial Bank of China, Bank of China and Bank of Communications may even have slipped into a loss.
Meanwhile, China Construction Bank Corp is set to perform the best, though only scraping into growth with a 0.2 per cent rise in profit to 228.1 billion yuan.
The poor performance was caused by falling interest income, which traditionally provided the bulk of the banks’ revenues.
Last year, net interest income was hit by a decline in net interest margins – the difference between the interest banks gain on their assets and the amount they have to pay out on deposits, as a proportion of their total assets.