ICBC’s interim profits beat expectations, bad loan ratio falls

Profit rise of 1.9 per cent better than analysts’ forecasts of 1.3 per cent, though fee-based income falls

PUBLISHED : Wednesday, 30 August, 2017, 5:48pm
UPDATED : Wednesday, 30 August, 2017, 10:07pm

Industrial and Commercial Bank of China, the nation’s largest lender by assets, reported better-than-expected profit for the first half of this year on Wednesday.

The Beijing-based bank said it earned 153 billion yuan (US$23 billion) in the six months ended June 30, a 1.9 per cent rise over the same period a year earlier and beating a consensus forecast by analysts of a 1.3 per cent rise to 152.1 billion yuan.

Its interim performance was better than expected, the bank said in a statement on Wednesday.

The bank’s management team is confident that asset quality will keep improving, Yi Huiman, chairman of the bank, told reporters in Beijing on Wednesday.

Its non-performing loan ratio dropped to 1.57 per cent on June 30 from 1.62 per cent at the end of last year, reflecting improving assets quality.

It was below the average of 1.6 per cent for the nation’s five biggest state-owned banks.

Net interest income for the first half rose by 7.1 per cent from a year earlier to 250.9 billion yuan. Its net interest margin, a key measure of profitability, was 2.16 per cent. The average margin for the top five banks was 2.02 per cent in the period, according to regulatory data.

Fee-based income for the period dropped to 76.6 billion yuan, down 6.2 per cent from a year earlier.

“The bank showed improving performance in the first half, reflected by bad loan ratio and deposits growth,” said Li Shanshan, a banking analyst at BOCOM International in Beijing.

Looking ahead, she said the bank may well continue to improve in the second half by posting a stable or even better net interest margin.

Dai Ming, a fund manager at Hengsheng Asset Management in Shanghai, said the market had expected ICBC to benefit from its vast retail base and savings strength amid prudent and neutral monetary conditions.

The bank’s declining fee-based income could be attributed to tighter regulatory scrutiny of the assets management sector, he said.

The People’s Bank of China is leading the nation’s banking, securities and insurance regulators in drafting new rules governing the burgeoning asset management sector.

As of the end of May, the banking asset management market shrank to 28.4 trillion yuan, down 1.6 trillion yuan from a month ago, the largest monthly drop in a decade.

“To seek further growth, the bank needs to improve its capabilities in serving the evolving wealth management demand from a increasingly tech-savvy customers,” Dai said, noting that the bank still lacks agility when compared with disruptive internet finance firms.