Bank of China posts 5 per cent rise in first-half profit
Bank of China, the country’s fourth-largest bank by assets, posted a 5.2 per cent rise in first-half profit on Tuesday, driven by higher interest margins, while its unit BOC Hong Kong also reported higher profit.
Net profit rose to 109.1 billion yuan (US$16 billion) for the first six months of this year from 103.7 billion yuan in the same period last year, while the interest margin was up 4 basis points at 1.88 per cent from last year.
The improved interest margin was partially a result of three rounds of reserve requirement ratio (RRR) cuts by the central bank between January and June, which reduced the amount of cash banks are required to hold as reserves.
While the country’s monetary policy remains neutral, policymakers have been clamping down on financial risks while at the same time making sure small enterprises can raise enough funds.
“The big bank’s fundamentals have slightly improved as they benefited from the regulator’s intensified crackdown on the illegal shadow banking system,” said Wang Feng, chairman of Ye Lang Capital.
The government’s campaign to weed out illicit and risky behaviour in the peer-to-peer (P2P) lending sector have boosted demand of bank loans among corporate borrowers, Wang said.
“Stepped-up supervision on financial technology businesses will continue to boost the businesses of the big banks,” he said.
Bank of China reported the ratio of impaired loans and non-performing loans to total loans fell 2 basis points to 1.43 per cent.
Net interest income rose 7.1 per cent to 176.7 billion yuan, and loans grew 4.1 per cent to 11.1 trillion yuan.
However, non-interest income including fees and commissions totalled 74.8 billion yuan, a drop of 10.3 per cent from the same period last year.
The loss was partially due to the government’s tightened regulations on the asset management business this year, part of a broader campaign to stem systematic financial risks.
Separately, BOC Hong Kong, the local arm of the bank, also reported its profit rose 17.7 per cent in the first six months of the year.
The second-biggest mortgage lender in the city said net profit for the first half rose to HK$17.5 million (US$2.2 million) from HK$14.897 million in the same period last year.
Interest margins excluding cost of foreign currency swap contracts went up 10 basis points to 1.56 per cent.
Lending to individuals rose 4 per cent to HK$12.8 billion. Residential mortgage loans grew 2.8 per cent while other individual loans climbed 10.6 per cent, which was thanks to an increase in property refinancing and personal loans for investment, the bank said.
Shares of Bank of China in Hong Kong closed up 0.8 per cent at HK$3.63 on Tuesday before the results announcement. Shares of BOC Hong Kong edged up 0.1 per cent to HK$39.25.