CCB profit growth slows on increasing bad loans

China Construction Bank Corporation (CCB), the nation’s second-largest lender, posted the smallest profit increase in five quarters, weighed down by rising bad-loan charges as the economy slowed.

By (Bloomberg)

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Published: Tue 27 Aug 2013, 12:49 AM

Last updated: Fri 3 Apr 2015, 5:33 AM

Net income in the second quarter climbed 9.7 per cent to 60.1 billion yuan ($9.82 billion) from 54.8 billion yuan a year earlier, based on figures published by the Beijing-based lender on Sunday. That compared with the 58.2 billion yuan median estimate of 11 analysts surveyed by Bloomberg.

The earnings reflect how Chinese banks are grappling with rising defaults and weak lending demand as the world’s second-largest economy heads for the slowest pace of expansion in 23 years. Combined net income at Construction Bank and its three largest peers may grow by less than 10 per cent this year for the first time since they sold shares to the public, according to analyst estimates compiled by Bloomberg News.

“Chinese banks’ asset quality shows no sign of stabilisation as the economy remains sluggish,” said Mu Hua, a Guangzhou-based analyst at GF Securities Co. “Bad loans is a lagging indicator therefore we expect the NPL balance to keep rising in the rest of year. The slowdown in loan expansion has also dragged banks’ profit growth and the trend will continue as the central bank keeps the lid on total lending.”

Bank of Communications Co., the nation’s fifth-largest, said on August 21 second-quarter net income rose 13 per cent, beating analyst estimates as fee income from services such as sales of wealth management products and credit cards jumped 30 per cent and it wrote off bad loans.

Shares of Construction Bank fell 0.9 per cent to HK$5.79 in Hong Kong on August 23, extending this year’s decline to 6.9 per cent. That compares with a 3.5 per cent drop in the benchmark Hang Seng Index in 2013.

Construction Bank, partly owned by Temasek Holdings Pte, Singapore’s state-owned investment company, doled out 583 billion yuan of new lending in the first half to take its total to 8.1 trillion yuan at the end of June. Nonperforming loans rose to 80.3 billion yuan from 74.6 billion yuan at the beginning of the year as borrowers struggled to repay debt.

In the first half, Construction Bank’s profit rose 13 per cent to a record 119.7 billion yuan, according to Sunday’s statement.

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