Large State-Controlled China Banks Post Earnings Growth Amid Rising Bad Loans

Arjun Pandit
29 Mar, 2024
Mumbai

Benchmark indexes in Shanghai advanced as investors reacted to the latest batch of earnings. 

Financial markets in Hong Kong were closed for a public holiday. 

Stock indexes gained for the second month in a row in Shanghai after banks reported better-than-expected earnings and investors looked ahead to the release of the official purchasing managers' index for manufacturing over the weekend. 

Market watchers are expecting the manufacturing activity index to increase after falling for five months in a row. 

The CSI 300 index edged up 0.07% to 3,523.43. 

Four of the of the largest banks in China said their non-performing loans will increase in 2023, but banks have provisioned for loan losses primarily linked to construction activities and property developers. 

Banks warned that falling real estate prices and weakening economic growth are likely to jeopardize banks' earnings and damage the value of the collateral held against those loans. 

Agriculture Bank of China, the third-largest bank by assets in China, increased 2.2% to 4.26 yuan after the state-controlled bank reported steady earnings, despite the decline in net interest margin and rise in bad loans. 

Net profit in 2023 jumped 4.2% to 269.8 billion yuan, or $37.3 billion, and the bank's non-performing loan ratio improved to 1.33% from 1.37%, declining for the third year in a row. 

Bad loans increased from 32.3 billion yuan to 320.1 billion yuan, and the bank's classified or special mention loans improved to 1.42% from 1.46%. 

China Construction Bank, the second-largest bank by assets in China, increased 1.1% to 6.91 yuan after the bank reported 2023 net profit increased 2.3% to 332.5 billion yuan. 

The bank's net interest margin dropped to 1.7% from 2.01%, and the non-performing loan ratio improved to 1.37% from 1.38% a year ago, respectively. 

Bank of China, the largest bank by assets in China, increased 1.1% to 4.43 yuan after the bank reported 2023 net profit rose 2.4% to 231.9 billion yuan. 

Net interest margin eased to 1.59% from 1.75%, and the non-performing loan ratio improved to 1.27% from 132% a year ago, respectively. 

Postal Savings Bank of China gained 0.6% to 4.79 yuan after the bank reported 2023 net profit increased by 1.25% from a year ago to 86.4 billion yuan. 

The bank's net interest margin declined to 2.01% from 2.2%, and the non-performing loan ratio eased to 0.83% from 0.84% a year ago, respectively. 

On Thursday, ICBC said its bad loans increased 10% to 353.5 billion yuan in 2023, and the company said in a briefing to investors that all major metrics are "within a healthy range" and these indicators are either stable or improving.