Five of China’s largest state-owned banks posted their strongest quarterly profit growth in years, Reuters reported, despite weak borrowing demand and a slowing economy that continued to weigh on lending.
Agricultural Bank of China led with 10.8% net profit growth from a year earlier. Bank of Communications posted 10.1%, Industrial and Commercial Bank of China rose 10%, China Construction Bank gained 9.8% and Bank of China recorded 6.4%, Reuters reported. The gains were each bank’s best quarterly results since either 2021 or 2022.
China’s economy grew 4.5% in the third quarter while property investment fell, according to EconoTimes’ earlier coverage of third-quarter growth and property investment. Reuters reported that net interest margins were flat at Industrial and Commercial Bank of China, Agricultural Bank of China and Bank of China. China Construction Bank’s margin fell to 1.36%, while Bank of Communications reported a slight increase.
Banks’ earlier adjustments to higher-cost deposit rates helped support earnings, but Reuters said that benefit was diminishing in the second half of the year. Analysts cited by Reuters said monetary easing and mortgage interest subsidies were also helping lower funding costs. Targeted monetary support introduced in September modestly improved credit demand, but analysts said it was unlikely to spur a substantial rise in lending or mortgage growth.
Nonperforming-loan ratios were broadly steady as lenders stepped up bad-debt disposals, Reuters reported. Three banks said their ratios were unchanged from June; Agricultural Bank of China and Bank of Communications reported declines to 1.23% and 1.29%, respectively. As revenue improved, lenders increased their buffers against potential loan defaults, lifting impairment charges.
Technology lending brought emerging credit risks. Nicholas Zhu, a banking analyst at Moody’s, told Reuters that newer technology companies had yet to experience a full business cycle, while credit risks in the sector were beginning to surface. China Construction Bank said its science-and-technology lending grew faster than its average loan growth.
Bond gains continued to support earnings, though Xing Zhaopeng, ANZ’s senior China strategist, said very low yields could limit how long that support lasts. Bank of Communications said its net trading gains rose 22.7% year on year in the first nine months, largely reflecting fair-value increases after CXMT Technology’s July IPO. Subsequent declines in chip shares increased volatility in banks’ equity investments, Reuters reported.
