China's biggest listed lenders, facing the country's slowest growth in more than a quarter century and rising borrower defaults, reported flat third-quarter profits as they moved to clean up bad debt on their balance sheets. They also came under pressure as core lending became less profitable and produced less income.
Three of the five - Bank of Communications (BoCom), Agricultural Bank of China (AgBank) and China Construction Bank Corp (CCB) - reported a slight drop in their bad loan ratios. Industrial and Commercial Bank of China (ICBC), the country's largest listed lender by assets, and Bank of China (BoC)
said their non-performing loan (NPL) ratios increased slightly. Profit growth at the five big banks was modest at best, and four of them reported that net interest margins - the difference between the interest they earn on loans and the interest they pay out to depositors - fell, as successive interest rate cuts and new tax rules weighed on earnings. Net profit at BoCom rose just 1.4 percent in July-September from the year-ago period, while BoC's profit edged up 2.4 percent. ICBC said its profit slipped 0.2 percent.
The top lender also said its net interest margin dipped to 2.18 percent from 2.21 percent at end-June, in line with compressions at CCB, BoC and BoCom. China's mid-tier banks, including China Merchants Bank Co and Chongqing Rural Commercial Bank, have also reported dwindling margins. While NPL rates are stabilizing at the so-called Big Five, analysts reckon bad debt formation will continue to grow.
CCB sold 702 million yuan ($103.6 million) worth of securities backed by non-performing corporate loans in China's interbank bond market last month, making it the fourth domestic bank to issue such securities since May. ICBC issued 1.08 billion yuan of non-performing asset-backed securities at the end of September.
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