Big banks see slower Q1 profit increase


FOUR of China's five biggest banks announced quarterly earnings results yesterday, posting a combined net income of 172.33 billion yuan (US$27.29 billion) in the first three months of 2012 with an average year-on-year jump of 17.6 percent.

The Industrial and Commercial Bank of China, China Construction Bank, the Agricultural Bank of China, and the Bank of Communications announced moderate growth in net profits for the first quarter as an economic slowdown curtailed expansion in loan margins.

China's economy last quarter expanded at the slowest pace in almost three years.

ICBC, the country's biggest lender? posted the slowest earnings growth in almost three years. Its first-quarter net profit rose 14 percent, down 15 percentage points from a year earlier, to 61.37 billion yuan. Non-performing loans dropped 192 million yuan to 72.82 billion yuan from the end of last year, while its NPL ratio shed 0.05 percentage point to 0.89 percent.

"Earnings growth at Chinese banks will be lackluster this year as banks' pricing power, the key profit driver for 2011, is weakened by the slowing economy and the loosened monetary policy that follows," said Wilson Li, a Shenzhen-based analyst at Guotai Junan Securities Co. "Demand for loans is also weak. It's hard for Chinese banks to repeat the growth we've seen in the past few years."

CCB registered a deeper decline in earnings growth. The lender's net profit increased 9.26 percent, a plunge of almost 25 percentage points from the previous year, to 61.37 billion yuan.

The AgBank said its net profit in the first three months rose 27.6 percent to 43.46 billion yuan.

BoCom's first-quarter net profit rose 19.6 percent, down 7.49 percentage points from last year, to 15.89 billion yuan.

The smallest lender among the four said it ensured growth by optimizing its credit structure through increasing loans to small businesses.

However, "the growth of small business loans is limited by overall credit supply and macro-economic controls although it outpaced the growth of gross loans," said Qian Wenhui, vice president of BoCom.



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