World’s largest company warns of ‘complicated’ second half, even as ICBC’s interim profit growth of 4.5 per cent beats estimates
- China’s largest lender by assets said the global economic environment is expected to ‘tighten on the whole’ in the second half
- ICBC said it still expects China’s economy will continue to ‘operate robustly’
Industrial and Commercial Bank of China (ICBC) warned on Thursday that banks could face a “complicated economic landscape” for the rest of 2019, even as its profit rose 4.5 per cent in the first half despite navigating a “changing economic and financial environment”.
The bank, China’s largest by assets, reported a profit of 167.9 billion yuan (US$23.5 billion) in the first six months of the year, compared with 160.4 billion yuan in the same period a year ago.
“On the one hand, the world economic environment is expected to tighten on the whole. There are more sources of global unrest and risk points, and considerable uncertainties in economic operations,” the bank said in a filing to the Hong Kong stock exchange. “On the other hand, the Chinese economy will continue to operate robustly. A host of macro control policies such as streamlining administration and delegating power, cutting taxes and fees, and targeted easing start to take effect, creating a business environment in favour of the banking sector’s sound and efficient operation.”
Investors shy away from China Merchants Bank amid US sanctions concern
The bank’s shares closed unchanged on Thursday at HK$4.89 in Hong Kong and finished the day up 0.37 per cent at 5.42 yuan in Shanghai.
ICBC’s results came as a trade war has raged between the world’s two biggest economies for the past year and weighed on the results of many lenders – inside and outside China. The tensions have hurt market sentiment and sent some investors to safety on the sidelines. The tit-for-tat showdown – US and China have placed tariffs on each other’s imports – also has raised fears that a global recession could happen as soon as next year.
China’s economic growth also has slowed this year, amplified by a decline in global trade and a shift in supply chains as tariffs have come online.
Smaller banks may struggle in China’s slowing economy, S&P warns
Fitch Ratings said last week that a severe economic slowdown in China triggered by the trade war could put credit pressure on banks in Asia’s developed markets, with the most direct exposure among Hong Kong lenders.
S&P Global Ratings said in a research report on Tuesday that some small and mid-sized banks in China are less equipped to deal with the country’s “slowing and rebalancing economy” and could be forced to merge with larger players.
In May, the People’s Bank of China seized control of Baoshang Bank, a Baotou-based lender, citing a misappropriation of funds by its largest shareholder.
In the first half, ICBC said operating income – similar to revenue in the US – rose 9.1 per cent to 394.2 billion yuan. Net interest income increased 7.8 per cent to 299.3 billion yuan in the first six months of 2019.
The bank’s non-performing loan ratio improved to 1.48 per cent at the end of June, compared with 1.52 per cent at the end of 2018.
Its net interest margin – a gauge of bank profitability – declined slightly to 2.29 per cent at the end of June, compared with 2.30 per cent in the same period a year ago.
