China’s top banks swamped by wave of Covid-19 related bad loans see pandemic casting shadow on full-year profits
- 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
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.
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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.
The bank’s president Zhang Qingsong quashed any expectations of a quick rebound, saying that the lender plans to stringently increase loan-loss provisioning during the second half. “In a complicated external environment, combined with measures to counter the impact from the pandemic, it’s inevitable that our net profit would be pressured,” he said.
Agricultural Bank of China’s loan loss provision during the first half rose 35 per cent, reaching 99.12 billion yuan from 73.48 billion yuan a year ago.
Bank of China said its net income plunged 11.5 per cent to 100.9 billion yuan between January and June. Its bad-loan ratio remained unchanged from the first quarter, standing at 1.42 per cent on June 30, but it was 0.05 percentage point higher than the end of last year.
Overall, Chinese banks reported a 9.4 per cent fall in first-half earnings at 1 trillion yuan, according to the China Banking and Insurance Regulatory Commission. By the end of the June, the average NPL ratio for commercial banks hit 1.94 per cent, the highest since 2009.
Beijing has required banks to sacrifice as much as 1.5 trillion yuan in profits this year to finance cheap loans, cut fees, defer loan repayments and grant more unsecured loans to help small businesses survive the downturn caused by the coronavirus lockdown.