ICBC manages to post slim profit

STANDARD Bank’s 20% owner — Industrial & Commercial Bank of China (ICBC), the world’s largest lender by assets — avoided posting a quarterly drop in profit after letting its buffer for covering bad loans fall below a regulatory minimum.

The bank’s provisions for bad loans stood at 141.2% of existing nonperforming credit, compared with a regulatory minimum of 150%, the Beijingbased lender said yesterday.

One of China’s biggest banks, Bank of China, reported this week that it had breached the minimum provision rule, the first lender to do so. Government officials are considering loosening the requirement, a move that would lend support to banks’ profits, as the lenders digest an increased volume of bad loans.

Analysts, including Sophie Jiang of Nomura International, have said the level could be reduced to 120% without risk to the financial system. Prior to the global financial crisis, the ratio was 100%, before being ratcheted up, reaching 150% in 2009.

ICBC’s net income rose 0.6% to 74.76-billion yuan ($11.5bn) in the three months ended March 31, as its lending margin contracted, and its soured debt surged. It is the fourth consecutive quarter that the lender has failed to achieve a profit gain of even 1% — and the profit number would have been worse if it had not breached the provision rule.

Bank of Communications Company, the country’s fifthbiggest lender, posted a 0.5% increase in first-quarter profit yesterday. Its coverage ratio was at 151%.

Agricultural Bank of China, the third-largest, reported a 1.1% profit gain and a coverage ratio of 180%.

Slowing economic growth has helped to propel Chinese banks’ bad loans to the highest level since 2006, putting at risk more than a decade of annual profit gains for the lenders.

ICBC’s nonperforming loans surged 14% from the beginning of the year to 204.7-billion yuan as of March 31.