Major Chinese Banks Prepare to Delay COVID-19 Risks as Bad Debt Rises

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BEIJING / SHANGHAI (Reuters) – Four of China’s five largest state-owned banks said they had increased their provisions against bad debt to prepare for future losses due to the impact of the global coronavirus pandemic.

FILE PHOTO: An Agricultural Bank of China logo is seen during the SIBOS Banking and Financial Conference in Toronto, Ontario, Canada, October 19, 2017. Photo taken October 19, 2017. REUTERS / Chris Helgren

All five said their biggest profits had plummeted in at least a decade and increased loans made when their half-year results were announced on Sunday and last week.

The results highlight the impact of the pandemic and the economic downturn on Chinese banks which weathered the first quarter global trend with higher profits and stable bad debt.

Agricultural Bank of China Ltd (601288.SS) (1288.HK) (AgBank) said that “the delayed impact of the epidemic and the risk of uncertainty should be passed on to the banking sector,” in its half-yearly results on Sunday.

China Construction Bank Corp (CCB) (601939.SS) (0939.HK), the country’s second-largest lender in terms of assets, said it plans to assess credit risks and increase provisions, as does Bank of China Ltd (601988.SS) (3988.HK) (BoC) said the same.

More directly still, Bank of Communications Co Ltd (601328.SS) (3328.HK) said on Friday that it had strengthened “provisions aimed at countering the future impact of the pandemic”.

As the pandemic hits economies around the world, the BoC, China’s most international of major state-owned banks, has said it will continue to hedge against risks in global financial markets in the second half of the year.

THIN MARGINS

Net interest margins (NIM) – a key indicator of bank profitability – fell at the Industrial and Commercial Bank of China (ICBC) (1398.HK), (601398.SS), the world’s largest commercial lender by assets, BoCom, CCB and AgBank.

But at the BoC, the NIM improved slightly to 1.82% from 1.8% three months earlier.

AgBank fell to 2.14% at the end of June from 2.17% at the end of March, while at ICBC it narrowed to 1.98% at the end of the second quarter, from 2.2% at the end of the second quarter. end of the first.

Non-performing loan (NPL) ratios increased at the big five banks during the review period, with ICBC’s rising to 1.5% at the end of June from 1.43% three months earlier and that of the CWB up 0.07 percentage point in second. quarter at 1.49%.

China’s commercial banks overall posted a 9.4 percent drop in first-half net profit to 1 trillion yuan, according to data from the China Banking and Insurance Regulatory Commission.

At the end of the June quarter, the average non-performing loan ratio of commercial banks was 1.94%, according to commission data, the highest since 2009.

Reporting by Zhang Yan and Cheng Leng in Beijing and Engen Tham in Shanghai; Edited by Himani Sarkar, Sam Holmes and William Mallard

Our standards:Thomson Reuters Trust Principles.

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