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All five reported their biggest profit falls in at least a decade and an increase in soured loans when announcing their half-year results on Sunday and last week.
The results highlight the impact of the pandemic and the economic slowdown on Chinese banks that bucked the first-quarter global trend with higher profits and steady bad loans.
Agricultural Bank of China (OTC:ACGBF) Ltd (SS:601288) (HK:1288) (AgBank) said “the lagging impact of the epidemic and the risk of uncertainty are expected to be further transmitted to the banking industry,” in its half-year results on Sunday.
China Construction Bank (OTC:CICHF) Corp (CCB) (SS:601939) (HK:0939), the country’s second-largest lender by assets, said it plans to assess credit risks and up provisions, just as Bank of China Ltd (SS:601988) (HK:3988) (BoC) said the same.
Even more directly, Bank of Communications Co Ltd (SS:601328) (HK:3328) said on Friday it had boosted “provisions to counter the future impact of the pandemic.”
As the pandemic batters economies globally, BoC, the most international of China’s large state banks, said it would keep guarding against global financial market risks in the second half.
SLIM MARGINS
Net interest margins (NIM) – a key gauge of bank profitability – fell at Industrial and Commercial Bank of China (ICBC) (HK:1398), (SS:601398), the world’s largest commercial lender by assets, BoCom, CCB and AgBank.
But at BoC, NIM improved slightly to 1.82% from 1.8% three months earlier.
AgBank’s fell to 2.14% at the end of June from 2.17% at the end of March, while at ICBC it narrowed to 1.98% at the end of the second quarter, from 2.2% at the end of the first.
Non-performing loan (NPL) ratios rose at the big five banks during the reporting period, with that of ICBC increasing to 1.5% by the end of June from 1.43% three months earlier, and that of CCB rising by 0.07 percentage points in second quarter to 1.49%.
Chinese commercial banks overall posted a 9.4% drop in first-half net profit to 1 trillion yuan, according to data from the China Banking and Insurance Regulatory Commission.
By the end of the June quarter, the average nonperforming loan ratio for commercial banks was at 1.94%, commission data showed, the highest since 2009.
