Rapid growth in profits for the largest five Chinese banks

09/04/2018

The Industrial and Commercial Bank of China (ICBC), the country’s biggest bank, saw its net profit up by 3 percent in 2017.

 

The deals for the 5 largest Chinese banks are very good. The Industrial and Commercial Bank of China (ICBC), Bank of China, Agricultural Bank of China, China Construction Bank and Bank of Communications, all posted a 3% higher growth. The news is particularly good considering that in 2016 these banks had recorded less than 2% or even negative growth in 2016.

The situation has also improved because the lenders have benefited from some of the government efforts to curtail risks from China’s almost $30 trillion of debt.

The reasons for these improvements, according to Zeng Gang and the China Academy of Social Sciences, are to be found in the improved asset quality and rising net interest margins. In fact now many firms are more capable of paying back their loans as supply-side reform has helped their financial performance, easing the pressure on banks.

Another factor that has allowed the success of these five banks has been to provide a guarantee to investors from risks. If on the one hand, in fact, the banking regulator decided last month to lower required provision coverage ratio, on the other hand, the five banks raised their provision coverage ratio as their asset quality improved.

 

For first time in six years, the non-performing loan rates of the five banks all fell last year

 

It should also be remembered that the situation has improved thanks to the actions taken by the Chinese government. From almost a year, in fact, lenders have benefited from some of the government efforts to curtail risks from China’s almost $30 trillion of debt.

 

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