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Chinese banks to see greatly lower net

CHINESE banks will report "substantially" slower profit growth in 2009 because of weaker loan demand, narrower margins and rising credit costs, according to China Merchants Bank Co President Ma Weihua.

China Merchants and other domestic banks are facing more risks and growing pressure on profitability as the global financial crisis deepens, Ma wrote in Shanghai Securities News. The "super-growth" scenario in the past will be hard to repeat in the future, he added, according to Bloomberg News.

Chinese banks, which posted a combined 67 percent jump in first-half profit on higher lending, may report a drop in earnings in 2009 as the nation's policy of reviving growth through lower interest rates undermines profits and loan defaults increase, according to a November 30 HSBC Holdings Plc report.

The central bank has cut lending rates five times by a total of 216 basis points since September to stimulate demand for loans. China's economy will grow 7.5 percent next year, the slowest pace in almost two decades, as the global financial crisis deepens, the World Bank said.

Loan default risk is the biggest single threat to Chinese banks, which face "a choppy 2009" because the potential for credit losses is rising, Fitch Ratings said last month.


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