Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

China's big banks brace for lagging COVID-19 risks as bad loans rise

Coronavirus NewsAug 31, 2020 05:15
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. FILE PHOTO: An illuminated sign for the Bank of China is displayed outside a branch in central Sydney, Australia 2/2

BEIJING/SHANGHAI (Reuters) - Four of China's five largest state-owned banks said they have increased their provisions against bad debt to brace for future losses due to the impact of the global coronavirus pandemic.

All five reported their biggest profit falls in at least a decade and an increase in soured loans when announcing their half-year results on Sunday and last week.

The results highlight the impact of the pandemic and the economic slowdown on Chinese banks as borrowers struggle to repay debt after months of lockdown and some sectors, such as those in the travel industry, labour to survive on lingering COVID-19 fears.

Amid the grind, China's banks have been asked to step up and lend to flagging sectors while sacrificing profits in a bid to revive the country's fortunes.

Agricultural Bank of China Ltd (AgBank) (SS:601288) (HK:1288) said "the lagging impact of the epidemic and the risk of uncertainty are expected to be further transmitted to the banking industry," in its half-year results on Sunday.

China Construction Bank Corp (CCB) (SS:601939) (HK:0939), the country's second-largest lender by assets, said it plans to assess credit risks and up provisions, just as Bank of China Ltd (BoC) (SS:601988) (HK:3988) said the same.

Even more directly, Bank of Communications Co Ltd (BoCom) (SS:601328) (HK:3328) said on Friday it had boosted "provisions to counter the future impact of the pandemic."

Second-quarter loan-loss provisions were up 61% to 436% compared to the same period last year at ICBC, CCB, AgBank and BoC, showed data from China International Capital Corp (CICC).

The crater in first-half profit was mostly down to provisioning ordered by regulators, said CICC on Monday, noting that second-quarter profit would otherwise have been 1.5% to 5.1% for those four lenders.

"In the foreseeable future, downward pressure of banks' profit and revenue will continue to weigh," said Wang Yifeng, an analyst with Everbright Securities, adding that banks will keep boosting provisions in the third quarter.

SLIM MARGINS

Net interest margins (NIM) - a key gauge of bank profitability - fell at Industrial and Commercial Bank of China (ICBC) (HK:1398) (SS:601398), the world's largest commercial lender by assets, BoCom, CCB and AgBank.

But at BoC, NIM improved slightly to 1.82% from 1.8% three months earlier.

AgBank's fell to 2.14% at the end of June from 2.17% at the end of March, while at ICBC it narrowed to 1.98% at the end of the second quarter, from 2.2% at the end of the first.

Non-performing loan (NPL) ratios rose at the big five banks during the reporting period, with that of ICBC increasing to 1.5% by the end of June from 1.43% three months earlier, and that of CCB rising by 0.07 percentage points in second quarter to 1.49%.

Chinese commercial banks overall posted a 9.4% drop in first-half net profit to 1 trillion yuan (109.46 billion pounds), according to data from the China Banking and Insurance Regulatory Commission.

By the end of the June quarter, the average non-performing loan ratio for commercial banks was at 1.94%, commission data showed, the highest since 2009.

 

China's big banks brace for lagging COVID-19 risks as bad loans rise
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email