MARGINS at China’s Big Five lenders shrank during the first quarter as banks came under pressure to support cash-starved property developers while loan demand remained weak.
Agricultural Bank of China’s (AgBank) net interest margin (NIM) contracted to 1.44 per cent at the end of March from 1.6 per cent at Dec 31, while that of the country’s largest lender Industrial and Commercial Bank of China (ICBC) fell to 1.48 per cent from 1.61 per cent.
At Bank of China (BoC), the NIM narrowed to 1.44 per cent from 1.59 per cent at end-2023, while China Construction Bank (CCB) said its dropped to 1.57 per cent from 1.7 per cent and pointed to a Chinese economy “still confronted by challenges such as inadequate effective demand”. China’s Bank of Communications (BoCom) also posted a narrower net interest margin on Friday (Apr 26).
ICBC, BoC and CCB all posted drops in first quarter net profit of more than 2 per cent compared with the first three months of 2023, while AgBank recorded a 1.63 per cent drop. BoCom bucked the trend with a 1.44 per cent increase in first quarter net profit.
All five lenders posted flat or slightly improved non-performing loan ratios at the end of March compared with the end of December.
However, smaller banks will lag on their sour debt ratios, S&P said in a note this month.
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“Short-term obstacles to the banking sector during this transition include a prolonged property downcycle. Smaller banks could be vulnerable in the process, especially those in city and rural areas because they must endure local economic conditions,” said S&P. REUTERS
