SHANGHAI: Three of China’s largest banks have said that the country’s lenders face multiple headwinds this year that include the pandemic, global politics and domestic turmoil in the real estate industry.

China’s banking industry is facing “a more complicated and severe business environment,” the country’s second-biggest lender by assets China Construction Bank Corp (CCB), said on Tuesday.

“The global epidemic will continue to recur, the easing policies of developed economies will be withdrawn, geopolitical conflicts will intensify,” Bank of China (BoC) , the country’s fourth-largest bank by assets, also said on Tuesday.

Meanwhile, the president of China’s Bank of Communications Co Ltd (BoCom), on Friday said it would be difficult for the bank to deliver satisfactory earnings this year.

China has been battling a resurgence in COVID infections in some of its largest cities, which has led to partial and full-scale lockdowns which analysts say will be a drag on the economy.

The main impact on banks will be “rising loan delinquencies among service sectors,” said Nicholas Zhu, a banking analyst at Moody’s.

“These industries include wholesale and retail, leisure travel and other consumer discretionary services,” he added.

The banks’ warnings about the difficult outlook came alongside full-year net profit figures from the three lenders that beat estimates.

At BoC, profit for the full year increased 12.3% to 216.6 billion yuan, above a Refinitiv estimate of 199.1 billion yuan from 17 analysts. It was the same story at CCB, where net profit for the full year increased 11.6% to 302.5 billion yuan, compared with a Refinitiv estimate of 293.1 billion yuan from 21 analysts.

The non-performing loan ratio at CCB fell to 1.42% at year-end compared with 1.51% three months ago, while at BoC it was 1.33% by year-end, compared with 1.29% end of September.

The net interest margin, a key gauge of bank profitability, stood steady at 1.75% from the previous three months for BoC, while at CCB it dropped to 1.94% at the end of the year from 2.12% three months earlier.