China’s top banks swamped by wave of Covid-19 related bad loans see pandemic casting shadow on full-year profits

Name: HSBC sees second-quarter profits plunge by 82 per cent thanks to coronavirus
Uploaded: 2020-09-01T01:30:19.000Z
Duration: 2 min 5 s
Description: HSBC sees second-quarter profits plunge by 82 per cent thanks to coronavirus

Senior Chinese bank officials expect more bad loan provisioning to come, resulting in further pressure on net profit for the full year

The mainland’s five leading commercial banks reported their maiden decline in profitability since the global financial crisis

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China’s banking sector has been weighed down bad loans related to the coronavirus pandemic. Photo: Bloomberg

Georgina LeeandDaniel Ren

Published: 9:30am, 1 Sep 2020Updated: 9:30am, 1 Sep 2020

Top executives of China’s leading state-owned banks dampened hopes of a quick recovery, saying they expect their second-half net profits to continue to be weighed down by mounting sour loans despite the economy making a steady recovery from the coronavirus pandemic.

The mainland’s five leading commercial banks reported their maiden decline in profitability since the global financial crisis, which was due primarily to higher provisioning for bad loans. This is despite China’s gross domestic product rebounding 3.2 per cent in the second quarter, from the 6.8 per cent contraction seen in the first quarter.

Analysts expect Chinese banks’ profitability to come under pressure for a variety of reasons, ranging from weak consumer sentiment to geopolitical tensions. The stock markets in Hong Kong and the mainland fell on Monday amid concerns over banks’ outlook.

“The coronavirus is the biggest black swan [the banking sector has seen],” Jin Yanmin, chief risk officer at China Construction Bank, said during the bank’s results briefing on Monday. “As the global economy is in the middle of an adjustment, going forward [more] non-performing loans will be reported next year” as the government and central bank end economic stimulus measures, affecting corporate borrowers further.

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HSBC sees second-quarter profits plunge by 82 per cent thanks to coronavirus

China Construction Bank reported a net profit of 137.63 billion yuan, a 10.7 per cent from 154.19 billion yuan a year ago.

Loan loss provisioning rose 49 per cent from a year ago to 111.38 billion yuan. CCB’s non-performing loan ratio rose to 1.49 per cent from 1.42 per cent at the end of December.