Chinese banks face profit squeeze as loan growth falters
Banks are facing the increase in credit growth and an increase in bad loans.
Net interest margins fell to a record level and affected profitability
Analysts are waiting for an increase in impaired loan rates between economic difficulties
Beijing, 29 August (Reuters) – The first half results of the best Chinese banks on Friday, a deflationist economy will undermine the effect of slowing credit growth in the economy, default of small enterprises and consumers and narrowing the narrowing margins due to lower rates.
Analysts, the appearance of the world’s No.2 economy, increasing geopolitical tensions, weak consumption and property industry is clouded by a long -term crisis, the coercion in the bank balance sheets will deepen in the short term, he said.
Investors will focus on the management interpretation of banks’ loan growth and the quality of asset quality and how Beijing plans to balance the risk of risk with policy priorities to revive the economy.
The Net profit of the Chinese Industrial and Commercial Bank (ICBC) is expected to decrease by 0.8% annually in the first half, while the Chinese Bank is expected to decrease an average of 0.9%.
The Chinese Construction Bank, the Chinese Agricultural Bank and the Communication Bank are estimated to increase by 0.4%, 1.2%and 0.5%respectively, respectively.
The first five banks of the state will report the results of the results after Sunday hours on Friday and follow the calls made with analysts.
When Chinese banks’ net interest margin (NIM) – a significant profitability indicator – when it fell to a record level of 1.42% of June, official data showed that it was below 1.8% accepted in the sector when necessary to maintain reasonable profitability.
Profit margins in the Chinese banking sector have been under pressure since the post -avoidant period, weighted by the Central Bank with consecutive interest rate deductions by the Central Bank to start the slowing economy.
Despite a few deposit ratio reductions to alleviate cost strains, banks continue to fight with profit margins as saving increases.
“We expect the Fitch Ratings Elaine XU to continue for Chinese banks, including state banks, and to host the rest of the year to host profitability and internal capital.” He said.
Xu is expected to increase this year, considering the difficulties for internal economic recovery due to the weaknesses in the important real estate market and uncertainties on trade tensions in Chinese banks.
The CSI Banks index gained 15.5% in the first six months and 15.5% in parallel with 15.4% of the wider CSI 300. However, the bank shares fell in favor after climbing to the record level in July, and this month fell by 1.1%, while the CSI 300% progressed 8.7%.
In addition to a lower interest rate environment, local banks face pressure pressure to provide cheaper loans to promote the economy, and the warm private sector borrowing borrowing compresses profit margins.
In March to support the stability of the banking sector and to provide credit flow to economically important sectors, four of China’s largest state loans in March revealed a 72 billion dollar re -capital planning plan.
According to Halkal Dragonics China Finance Analyst Xiaoxi Zhang, Chinese banks “probably not win enough to maintain themselves” and the periodic government’s re -capitalization means that they will not fall.
“While decreasing again in 2025, more bad loans are created, and the last re -capitalization is going so far.”
“The future of China’s banks seems to be a loan cycle for politics and then the capitalization cycle again. Banks will lame – never continue themselves, but never collapses.” (Reporting by Ziyi Tang and Engen Tham;
