China’s 16 banks report upbeat half-year performance
BEIJING: China's 16 listed banks reported significant increase of profitability in the first half of this year thanks to a steady rise of net interest margins of the banks, and saw decline of both the volume of bad loans and the bad loan ratios, according to half year reports of these banks.
Analysts hold that the performance of listed banks is expected to continue to show fast growth in the second half of this year due to a higher scale of lending than in the same period last year, further rebound of net interest margins, and stable quality of assets.
--Steady rebound of net interest margins Combined net profits of the 16 listed banks reached 343.398 billion yuan in the first half of this year, up 45.75 percent year on year, and the rise of banks' profitability is mainly the result of rise of net interest margins.
Net interest margins of the 15 listed banks (excluding the Bank of Beijing) reached 2.67 percent, posting relatively rapid growth compared to the same period last year.
Experts predict that competition among the banks over acquiring deposits will be even more fierce in the second half, so the cost of deposits may increase.
However, the bargaining power of the banks in granting loans is expected to continue to strengthen in the second half, so net interest margins of the banks should rise in a stable fashion.
The bill financing ratios of commercial banks for new loans dropped greatly since the second quarter of this year, while the scale of medium-and long-term loans with higher interest rates increased, which is also good news for banks looking to boost performance.
--Continued improvement of asset quality According to banks' half-year reports, their general asset quality continued to improve in the first half of this year, allaying fears that massive lending in 2009 might have incurred a rise of bad debts. Of the 16 banks, 13 saw a decline in the scale of bad debts and in bad loan ratios in the first half from the start of the year. Noticeably, the bad loan ratios of the Shenzhen Development Bank, the Bank of Ningbo, China Everbright Bank, and the China Merchants Bank all fell below 1 percent.
However, outstanding bad loans of the Bank of Communications, the China Minsheng Banking Corp. and the Industrial Bank rebounded in the first half, increasing 324 million yuan, 115 million yuan, and 111 million yuan respectively, from the beginning of the year.
All listed banks raised their provisional coverage for losses in the first half, providing solid foundations for profit increases in H1. Thus far, only the provision coverage of the Agricultural Bank of China's (601288.SH) fell below the floor level of 150 percent set by the banking regulator.
Impact of banking-trust cooperation limited The China Banking Regulatory Commission (CBRC) released the new rules on banking-trust cooperation in August, urging banks to transfer their off-balance sheet assets that have been used for banking-trust cooperation onto their balance sheet by the end of 2011.
According to the latest statistics, the scale of trusted wealth management products issued via banks hit 2.8 trillion yuan, which promoted market worries over future profitability of the banks. -PB News