4 Chinese banks post strong rise in profits
By Maggie Zhang |
April 29, 2011, Friday
|
Print Edition
Print Edition
FOUR of China's five biggest banks yesterday reported their net profits grew better than expected in the first quarter as their interest margins grew.
The Industrial and Commercial Bank of China Ltd, the world's biggest bank by market value, reported its net profit rose 29 percent from a year earlier to 53.8 billion yuan (US$8.3 billion), helping it remain as the world's most profitable lender.
China Construction Bank, the country's second-biggest bank, posted an annual 34 percent climb in net profit of 47.2 billion yuan. Net income at the Bank of China, the nation's third-largest, jumped 28 percent year on year to 33.44 billion yuan, while the Bank of Communications, the fifth-largest, said net earnings rose 27 percent to 13.3 billion yuan.
On Wednesday, the Agricultural Bank of China, the fourth-biggest, recorded a 34.07 billion yuan profit in the first three months.
"I am bullish on banking shares due to their rising profits backed by four interest rates increases since October," said Zhang Qi, a Haitong Securities Co analyst.
The government's move to tighten liquidity by raising interest rates four times since October actually boosted the profits of the banks by increasing their interest margins. The banks were also able to ask for higher margins from companies needing capital as the curbs on loans made it difficult for them to get credit.
Yu Yali, chief financial officer at BoCom, yesterday admitted the rate increases help boost the bank's profitability. The bank expects net interest margins to rise at a slower pace later this year as the effect of the rate hikes kick in, she said yesterday in Shanghai.
Shanghai-based BoCom's margin widened 10 basis points to 2.51 percent. One basis point is 0.01 percentage point.
BOC's margin grew to 2.11 percent from 2.04 percent in the same period of last year.
Market watchers expect further tightening, including one to two more interest rate hikes and several more increases in reserve requirement ratio, now at 20.5 percent for the biggest banks, to tame inflation.
Although the top five banks reported a bad loan ratio of less than 2 percent, Fitch Ratings warned earlier this month that it's "not inconceivable" that Chinese banks' bad debt ratio could reach 30 percent.
The Industrial and Commercial Bank of China Ltd, the world's biggest bank by market value, reported its net profit rose 29 percent from a year earlier to 53.8 billion yuan (US$8.3 billion), helping it remain as the world's most profitable lender.
China Construction Bank, the country's second-biggest bank, posted an annual 34 percent climb in net profit of 47.2 billion yuan. Net income at the Bank of China, the nation's third-largest, jumped 28 percent year on year to 33.44 billion yuan, while the Bank of Communications, the fifth-largest, said net earnings rose 27 percent to 13.3 billion yuan.
On Wednesday, the Agricultural Bank of China, the fourth-biggest, recorded a 34.07 billion yuan profit in the first three months.
"I am bullish on banking shares due to their rising profits backed by four interest rates increases since October," said Zhang Qi, a Haitong Securities Co analyst.
The government's move to tighten liquidity by raising interest rates four times since October actually boosted the profits of the banks by increasing their interest margins. The banks were also able to ask for higher margins from companies needing capital as the curbs on loans made it difficult for them to get credit.
Yu Yali, chief financial officer at BoCom, yesterday admitted the rate increases help boost the bank's profitability. The bank expects net interest margins to rise at a slower pace later this year as the effect of the rate hikes kick in, she said yesterday in Shanghai.
Shanghai-based BoCom's margin widened 10 basis points to 2.51 percent. One basis point is 0.01 percentage point.
BOC's margin grew to 2.11 percent from 2.04 percent in the same period of last year.
Market watchers expect further tightening, including one to two more interest rate hikes and several more increases in reserve requirement ratio, now at 20.5 percent for the biggest banks, to tame inflation.
Although the top five banks reported a bad loan ratio of less than 2 percent, Fitch Ratings warned earlier this month that it's "not inconceivable" that Chinese banks' bad debt ratio could reach 30 percent.
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