Agricultural Bank of China Posts 28.5% Rise In 2011 Earnings


Agricultural Bank of China (ABC) (601288, 1288.HK) posted a 28.5 percent year-on-year rise in 2011 net profit to 122 billion yuan, equivalent to about three million yuan per day, reports The Beijing News, citing a company filing.

Bank president, Zhang Yun attributes the rise in earnings to higher economic growth rates and the rapid development of the banking sector.

ABC recorded a 13 percent year-on-year increase in the scale of its total assets to 11.68 trillion yuan at the end of 2011, while new loan growth and new deposit growth totaled 671.96 billion yuan and 734.12 billion yuan, respectively.

Net interest margin rose 28 basis points from 2010 to 2.86 percent, while net interest spread increased 23 basis points to 2.73 percent.

According to ABC, the higher net interest margin and net interest spread were due to several hikes in benchmark rates by the central bank in the second half of 2010, and to better management of loan pricing.

Agricultural Bank of China had capital adequacy ratio of 11.94 percent and core capital adequacy ratio of 9.5 percent at the end of 2011, with its core capital adequacy ratio already at the minimum requirement for systemically important banks.

Zhang said ABC had no plans to raise funds from the capital market in 2012, and will instead use its retained earnings and adjust the structure of its business to meet regulatory requirements.

According to Zhang, although banks are reporting strong profit growth, the growth is line with that recorded by the real economy.

During the 2009-2011 period, the earnings growth of large-scale industrial companies were 13.02 percent, 53.58 percent, and 25.4 percent, while banks reported growth rates of 15 percent, 35 percent, and 36 percent, respectively.

The interest margins of the Chinese banking industry are in general, not above international standards, and as interest margins were 2.32 percent, 2.34 percent, 2.52 percent, 2.88 percent and 2.46 percent during the 2004-2010 year period, this showed profit growth did not derive mainly from higher interest margins, added Zhang.

According to Zhang, ABC capitalized on the huge loan growth, especially in 2009 and 2010, when loan growth was equivalent to the total recorded in the preceding eight years.

Executives at the bank benefited from a more than 10 percent increase in compensation last year.

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