Two of China's big state-owned banks said Tuesday their profits rebounded in 2017 after a pair of moribund years thanks to an accelerating domestic economy, and analysts expect further gains as a government credit clampdown favours big lenders. The Industrial and Commercial Bank of China (ICBC), the world's biggest lender in terms of total assets, said full-year profit grew 2.8 percent to 286.05 billion yuan ($45 billion).
Agricultural Bank of China (ABC) said its net income grew 4.9 percent to 182.97 billion yuan. Their earnings were reported in filings to the Hong Kong stock exchange, where both have shares listed. The remaining half of the "Big Four" Chinese banks - Bank of China and China Construction Bank - are expected to also release positive earnings news later in the week.
China's economy grew a forecast-beating 6.9 percent in 2017, picking up steam for the first time since 2010. Analysts said the big banks also are benefiting from the Chinese government's campaign to clean up bad loans and risky lending in its often chaotic and murky financial system. The crackdown is seen as hitting smaller lenders and wealth management companies hardest, driving them to seek loans from the established banks in order to clean up their balance sheets.
China's banking regulator is also believed to have recently lowered bad-loan provisions for banks, according to a Bloomberg News report, which frees up more cash for lending.
"China's banks have shaken off the doldrums," Richard Cao, a Shenzhen-based analyst at Guotai Junan Securities Co, was quoted by Bloomberg as saying.
"Their earnings growth will accelerate for the next two to three years." The big banks' profit growth was largely flat in the preceding two years as concerns grew over rising bad loans. But both ICBC and ABC reported lower non-performing loans (NPLs) for 2017.
ICBC's ratio of NPLs shrank to 1.55 percent as of end-December 2017, compared to 1.62 percent the previous year. ABC's ratio dropped to 1.81 over the same period, from 2.37 a year earlier. ICBC, which is dual-listed in Hong Kong and Shanghai, reported its earnings after markets closed on Tuesday. ABC announced before trading began and its Hong Kong-listed shares closed 2.73 percent higher at HK$4.52, while its Shanghai shares gained 0.52 percent to end at 3.84 yuan.