Boom fuels banks' H1 profit
By Leo Zhang |
August 31, 2010, Tuesday
|
Print Edition
Print Edition
FIRST-HALF net profit of 16 Chinese public lenders accounted for 46 percent of the total earned by 1,829 mainland-listed firms, reflecting a booming banking industry that benefited from sustained credit growth.
But analysts cautioned yesterday that banks will face challenges in the second six months as China tightens liquidity, take further steps to cool the property market and clears up local-government financing vehicles.
Sixteen mainland-listed banks posted a combined net income of 343.4 billion yuan (US$50.6 billion) from January to June, up over 30 percent from a year before, according to their separate earnings reports.
The big four state-owned lenders - the Industrial and Commercial Bank of China, the Bank of China, China Construction Bank and the Agricultural Bank of China - posted cumulative earnings of 256 billion yuan, up an annual 28.8 percent.
"Banks have performed well in both interest and non-interest-based businesses as profit margins have bottomed out," said Liu Yu, an Orient Securities Co trader. "Growth may ease in the coming months as liquidity goes tighter."
The central government is targeting 7.5 trillion yuan in new credit for 2010 after banks made a record 9.6 trillion yuan worth of fresh loans last year, nearly double the volume in 2008.
Chinese banks extended 4.63 trillion yuan in new loans from January to June, of which 1.38 trillion yuan were channeled into the real estate sector, according to the People's Bank of China.
Apart from concerns about real-estate loans, Chinese financial authorities are also accelerating the cleanup of irregular local government financing vehicles to prevent bad loans from spreading.
Funding vehicles of Chinese local governments had borrowed 7.66 trillion yuan by the end of June. China's banking regulator said this month that "the overall risk is manageable and will not lead to systemic risk."
"Property market adjustment and checks on local financing platforms will create uncertainties and damp investor sentiment in the short term," said Wu Yonggang, an analyst at Guotai Jun'an Securities Co. "But the current low valuation has already reflected such pessimism, making it relatively safe to buy into the banks."
Investors are also speculating the central government would step up efforts to cool the nation's real estate sector in the second half, which may raise banks' sour debt.
The banking regulator conducted a second round of stress tests on lenders this month, requiring them to gauge the impact on their balance sheets if property prices tumble by up to 60 percent.
But analysts cautioned yesterday that banks will face challenges in the second six months as China tightens liquidity, take further steps to cool the property market and clears up local-government financing vehicles.
Sixteen mainland-listed banks posted a combined net income of 343.4 billion yuan (US$50.6 billion) from January to June, up over 30 percent from a year before, according to their separate earnings reports.
The big four state-owned lenders - the Industrial and Commercial Bank of China, the Bank of China, China Construction Bank and the Agricultural Bank of China - posted cumulative earnings of 256 billion yuan, up an annual 28.8 percent.
"Banks have performed well in both interest and non-interest-based businesses as profit margins have bottomed out," said Liu Yu, an Orient Securities Co trader. "Growth may ease in the coming months as liquidity goes tighter."
The central government is targeting 7.5 trillion yuan in new credit for 2010 after banks made a record 9.6 trillion yuan worth of fresh loans last year, nearly double the volume in 2008.
Chinese banks extended 4.63 trillion yuan in new loans from January to June, of which 1.38 trillion yuan were channeled into the real estate sector, according to the People's Bank of China.
Apart from concerns about real-estate loans, Chinese financial authorities are also accelerating the cleanup of irregular local government financing vehicles to prevent bad loans from spreading.
Funding vehicles of Chinese local governments had borrowed 7.66 trillion yuan by the end of June. China's banking regulator said this month that "the overall risk is manageable and will not lead to systemic risk."
"Property market adjustment and checks on local financing platforms will create uncertainties and damp investor sentiment in the short term," said Wu Yonggang, an analyst at Guotai Jun'an Securities Co. "But the current low valuation has already reflected such pessimism, making it relatively safe to buy into the banks."
Investors are also speculating the central government would step up efforts to cool the nation's real estate sector in the second half, which may raise banks' sour debt.
The banking regulator conducted a second round of stress tests on lenders this month, requiring them to gauge the impact on their balance sheets if property prices tumble by up to 60 percent.
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