Ping An Bank follows China Merchants Bank in reporting profit growth, as smaller lenders ride post Covid-19 rebound
- Ping An Bank, China Merchants Bank and China Citic Bank have reported net profit growth of between 2 and 4 per cent recently
- Profit for sector as a whole expected to drop by 1.8 per cent, watchdog says
Several Chinese mid-sized commercial banks have posted growth in net profit recently, on the back of a strong recovery in lockstep with the country’s economy in the fourth quarter.
This is because some analysts and bank officials expect profitability at China’s big state-owned banks to be weighed down by sour loans in the aftermath of the coronavirus pandemic. The country’s banking sector is differentiated into the larger state-owned commercial banks and the smaller joint-stock banks. Joint-stock lenders such as Ping An Bank are not directly state-owned and count corporations as their shareholders.
According to estimates gathered by Bloomberg, net profit for the full year at China Construction Bank, Bank of China, Industrial and Commercial Bank of China and Agricultural Bank of China is expected to drop by between 6 and 8 per cent to 249.4 billion yuan, 169.9 billion yuan, 287.9 billion yuan and 194.7 billion yuan, respectively.
Ping An Bank, which reported its result on Monday evening, said its full-year profit had risen by 2.6 per cent. The bank, which is controlled by Ping An Insurance (Group), the country’s largest insurer by market cap, said its net profit rose to 28.9 billion yuan (US$4.8 billion) from 28.2 billion yuan a year ago. Its non-performing loan (NPL) ratio also improved, from 1.32 per cent in the third quarter to 1.18 per cent for the full year.
Retail-focused Ping An Bank’ bottom line was bolstered by a strong rebound in the fourth quarter, particularly in its fee income business, analysts said. This helped it overcome an 18 per cent increase in loan loss provisioning to 70 billion yuan, and to beat analysts’ expectations.
Last month, preliminary figures provided by China Merchants Bank showed that its net profit rose 4.8 per cent year on year to 97.3 billion yuan from 92.9 billion yuan, also due to strong revenue growth in the fourth quarter. Its NPL ratio declined from 1.13 per cent in the third quarter to 1.07 per cent for the full year.
“[China Merchants Bank’s] asset quality improved notably in the fourth quarter,” Morgan Stanley analysts including Richard Xu and Daniel Fang said in a recent note. They said that “asset quality on credit cards has likely stabilised in the fourth quarter, in our view”.
China Citic Bank’s full-year net profit also rose, climbing 2 per cent to about 49 billion yuan from 48 billion yuan during the same period a year ago, on lower provisions the bank set aside for bad loans, analysts said.