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UPDATE 1-China CCB's 2016 net profit rises slightly, margins shrink
March 29, 2017 / 2:19 PM / 6 months ago

UPDATE 1-China CCB's 2016 net profit rises slightly, margins shrink

* CCB 2016 profit up 1.45 pct on year

* NIM falls to 2.2 pct in Q4 from 2.26 pct in Q3

* NPL ratio eased to 1.52 pct end-Dec from 1.56 pct end-Sept (Adds CCB earnings and AgBank news conference details)

SHANGHAI/BEIJING, March 29 (Reuters) - China Construction Bank Corp (CCB), the country’s second-biggest lender by assets, reported on Wednesday a slightly higher 2016 net profit amid a squeeze on bank margins.

The results came a day after two other of China’s leading banks, Bank of Communications (BoCom) and Agricultural Bank of China (AgBank), reported modest profit growth as they battle the lowest net interest margins since at least 2011 amid a slowing economy.

CCB’s full-year net profit rose 1.45 percent to 231.46 billion yuan ($33.61 billion) from 228.1 billion yuan in 2015.

The bank’s net interest margin (NIM) - the difference between interest paid and earned - was 2.2 percent at end-December, down from 2.26 percent at end-September.

Fourth-quarter profit increased by 2.8 percent to 37.63 billion yuan ($5.46 billion) from 36.6 billion yuan a year earlier, according to Thomson Reuters calculations based on the company’s figures, and was above the 33.7 billion yuan average estimate from analysts polled by Thomson Reuters.

SOURED DEBT

CCB’s non-performing loan (NPL) ratio eased to 1.52 percent at end-2016 from 1.56 percent at end-September.

While the three banks that have reported earnings so far appear to have stemmed the growth in soured debt after a jump in disposals, lenders are taking steps to ramp up defences against an expected growth in NPLs this year.

“Asset quality is still the biggest problem for management”, BoCom President Peng Chun cautioned on Tuesday.

AgBank is in discussions to undertake more than 20 debt-to-equity deals after signing agreements with eight companies worth around 70 billion yuan.

Beijing has promoted debt-to-equity swaps as a way to curb dangerous levels of leverage among state-owned firms, and to help commercial lenders reduce the ratio of NPLs, which surged to a decade-high in 2015 as China’s economy grew at its slowest pace in a quarter of a century.

Chinese banks’ volume of bad loans climbed to 1.51 trillion yuan at end-2016, the highest since 2005 - a problem Beijing is looking to address with regulations such as those aimed at bolstering oversight of opaque and shadow banking-linked financial assets.

Like BoCom and AgBank, CCB saw a sharp almost 30 percent growth in residential mortgage lending last year to 3.59 trillion yuan, despite Beijing’s continued clampdown on an overheated property market.

“The banking industry will still face challenges of profound changes in operating environment,” CCB said in its earnings report. “De-capacity and de-leveraging will exert pressure on banks’ assets quality.”

$1 = 6.8883 Chinese yuan renminbi Reporting by Engen Tham in Shanghai and Matthew Miller in Beijing; Editing by Himani Sarkar and Ian Geoghegan

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