UpdateChina’s Ping An Bank profits climb 15 per cent, bad debt jumps by 50 per cent

Results from Ping An Bank’s first half of the year show the perils of moving swiftly into China’s credit card business.

Profits soared by 15 per cent and will likely outperform many of China’s bigger commercial banks when they report earnings later this month. The Shenzhen-listed bank posted 11.6 billion yuan in profits for the first six month of the year. Net interest margin climbed to 2.71 in June from 2.57 at the end of last year during a time that mainland banks are experiencing pressure on their ability to make money on traditional lending.

Income from fees and commissions soared by 76 per cent, becoming one of the driving forces behind Ping An Bank’s better-than-expected results.

But the rapid growth in fees did not come without challenges, namely asset-quality deterioration in the bank’s major ramp-up to its credit cards business.

Ping An’s non-performing loan ratio hit 1.32 per cent, up from just 1.02 at the end of last year. The bad loans were concentrated in its retail banking segment. The credit cards business notched a surprisingly high non-performing loan (NPL) ratio of 3.22 per cent

“To be more straight forward – they lent more, therefore they suffered more from NPLs expansion,” Erin Lee, a Shanghai-based analyst at Yuanta Securities. “The yield from personal loans including the credit card business was higher than that of corporate loans, and therefore the risks are generally higher.”