Banks' profitability improves in 2018
Chinese-listed banks saw improved business performance in 2018, while their credit quality showed mixed results. And lenders put a greater focus on credit supply in retail business to push forward their transformations, an industry report said on Friday.
Covering the 2018 financial results of 33 A-share and H-share listed banks, the study by auditing firm PricewaterhouseCoopers grouped lenders into three categories in terms of asset scale and business scope: six large commercial banks, seven joint-stock commercial lenders and 20 city and rural commercial banks.
At the end of 2018, total assets of the top six state banks amounted to 113.8 trillion yuan (US$16.8 trillion), up 6.6 percent year on year. Their total net profit grew by 4.7 percent annually to hit 1.08 trillion yuan.
The number for mid-sized competitors stood at 34.5 trillion yuan and 303.1 billion yuan, respectively, rising at a rate of around 5 percent and 6.3 percent, the report said.
As smaller players in China’s banking system, city and rural commercial banks posted varied results in line with economic performance in the regions where they operate.
The key driver behind banks’ improved earnings was an increase in net interest margins, thanks to the central bank’s move to inject liquidity into the market by adopting appropriate monetary policy tools, said Jimmy Leung, financial services leader for PwC’s China business.
In terms of asset quality, the overall non-performing loan (NPL) ratio of big banks declined slightly in 2018 to 1.45 percent, as they resorted to market-based debt-to-equity swaps and traditional methods such as write-offs, the study noted.
Nevertheless, both the balance and ratio of bad loans rose at most joint-stock lenders, with their overall NPL ratio at 1.66 percent. PwC attributed this mainly to their classification of large sum of loans overdue more than 90 days into NPLs in the past year.
Meanwhile, the NPL ratio of city/rural banks increased by 0.14 percentage points year-on-year to 1.54 percent, with the quality of their credit assets under growing pressure.
Data showed that large banks extended over three quarters of their retail loans to the housing mortgage sector, which had a much lower proportion in their smaller-sized competitors.
Around a third of joint-stock lenders’ retail credit was given to bank card business while the rural and city banks relied much on retailing and other business to boost their transformations.
Also, banks endeavored to launch more non-guaranteed wealth management products for investors, and the number reached 22.04 trillion yuan as of the end of last year.
They also channeled more money into small and micro-sized enterprises in 2018, to answer the central government’s call for more financial support to the real economy.