Cost cutting delivers profit growth for China state-owned banks CCB and ICBC
Greater pressure on bad loans at ICBC, but CCB sees its NPL ratio fall
Cost cutting in 2016 delivered a slight rise in full year net profit for both China Construction Bank (CCB) and ICBC despite falls in income.
CCB’s net profits for the year rose 1.7 per cent year on year to 233 billion yuan (US$33.8 billion) while ICBC saw a 0.5 per cent year on year increase to 279 billion yuan.
Analysts had been expecting CCB to post a rise, but ICBC’s came as a surprise with a slight decline having been forecast.
“Competition [in the banking sector] is about the struggle to control costs and the struggle to control risks,” ICBC chairman Yi Huiman said at a press conference in Beijing on Thursday. In 2016, ICBC did better on the former than the latter as unlike other Chinese state owned banks, its much watched non performing loan (NPL) ratio rose in 2016.
The increases in profit occurred despite significant falls in both banks’ income. At CCB, full year income in 2016 was 26.8 billion yuan lower compared to 2015 due to a collapse in its net interest margins, while ICBC’s was lower by 27 billion yuan.
However, both were able to cut expenses – CCB by 12 per cent, or 23 billion yuan, and ICBC by 12.5 per cent. Growth in fee and commission income made up the difference to enable the two to post a profit increase, albeit a small one in the case of ICBC.
