Retail loans a bright spot for China’s major banks as coronavirus continues to bite into profits

Officials from China’s biggest banks reported that credit card business rebounded during the third quarter

Still, banks’ bottom lines were weighed down by higher loan loss provisions, as borrowers hit hard by Covid-19 struggled to meet repayments

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China’s retail borrowers’ ability to repay will continue to improve going into the fourth quarter, the lenders forecast. Photo: Reuters

Published: 8:30am, 2 Nov 2020Updated: 8:30am, 2 Nov 2020

Leading Chinese banks reported declines in their third quarter profits, as a swelling pile of sour loans among borrowers hit hard by the coronavirus continued to bite into their bottom lines.

But the banks saw some recovery in their retail lending business, helped by mainland China’s economic rebound in the three months to September 30. The world’s second biggest economy grew by 4.9 per cent year-on-year.

China’s retail borrowers’ ability to repay will continue to improve going into the fourth quarter, the lenders forecast. Retail sales in mainland China rose 3.3 per cent in September from a year ago, the second monthly increase this year after a 0.5 per cent pick-up in August. The figures underscore China’s swift rebound from the impact of the pandemic.

Senior officials at Bank of Communications were optimistic that the worst impact of the coronavirus on asset quality was behind them.

“With the pandemic in China coming under control, and businesses and production having returned to normal, we are seeing the overall asset quality [of our loan book] trending towards an improvement,” said chief risk management officer Zhang Hui during a media call on the results last Friday.