Chinese banks set to report strong third-quarter profit as wealth management fees, loans growth outweigh exposure to troubled property developers

Lenders should report 10 per cent profit growth thanks to strong fees income, resilient loan growth, analysts say

Their exposure to troubled Chinese developers remains limited, and poses little threat to their asset quality for now

Reading Time:2 minutes

Many Chinese banks are creditors to troubled developers such as Evergrande and Fantasia, which have missed some payments to bondholders. Photo: Bloomberg

Published: 9:30am, 28 Oct 2021

Chinese banks are likely to report profit growth of around 10 per cent for the third quarter, as strong income from fees and steady loan growth more than offset any exposure to the embattled property market.

While the liquidity crunch at troubled developers such as China Evergrande, Fantasia Holdings Group and Sinic Holdings Group will probably start to show up on their loan books, most analysts said the exposure of banks to the sector remains limited and therefore unlikely to weigh on their non-performing loan (NPL) ratios.

Leading state-owned lenders including Bank of China, China Construction Bank, Agricultural Bank of China and Bank of Communications, will report their third-quarter earnings on Thursday and Friday.

Although China’s economic growth slowed to 4.9 per cent in the three months to September, from 7.9 per cent in the second quarter, loan growth remained resilient at 11.5 per cent, according to data the banking regulator disclosed this month.

Banks will report strong growth in their income from fees derived from wealth management products and mutual fund distribution, said Cindy Wang, an analyst at DBS.

“Retail customers have shifted their money from the property sector to the financial markets, thereby benefiting banks’ fee income due to stronger sales in wealth management products,” said Wang. “Overall, we expect this to help banks’ revenue growth.”