October 27th, 2010 | China Economic Net China’s “Big Four” banks post profits surge
After ABC’s (Agricultural Bank of China) successfully going public, the big four national banks appear jointly on the arena of interim performance report for the first time, which is a typical scene in the capital market.
As for the state of operation in the first half of this year, each of the big four banks lays more stress on the adjustment of credit structure after they granted huge loans in 2009, thus the profits from loans keep on increasing,.
See the performance of the four national banks:
ICBC (Industrial and Commercial Bank of China) has the highest profit, and the after-tax profit was up to RMB 85 billion in the first half year increasing by 27.3 percent on the year-on-year basis, with a surplus of RMB 0.25 per stock;
The profit increases most rapidly in ABC, which just went public, and the first financial statement reveals that the bank got a net profit of RMB 45.863 billion in the first half of 2010, rising by 40.2 percent year-on-year;
The profit of CCB (China Construction Bank) grows steadily, getting a pretax profit of RMB 92.194 billion and a net profit of RMB 70.779 billion in the first half year, with the year-on-year increasing rates respectively 27.22 percent and 26.75 percent;
The profit of BOC (Bank of China) rose differently at home and abroad; the bank as a whole got an after-tax profit of RMB 54.375 billion in the first half year, up by 25.77 percent, while its domestic business has grown rapidly with an after-tax profit of RMB 43.049 billion and a year-on-year increasing rate of 30.57 percent.
According to the information above, the big four national banks keep strong profit making in this year, and gain favorable profits for the share holders, as well as providing credit support for the economic development. Considering the large proportion of the big four banks in China’s banking service, we can confirm that the performance of banking in China will be remarkable in the year 2010.
The economic situation backs up such a prediction. Let’s take ICBC for an example. The surge of its profit in the first half year is based on the year-on-year increase of last year, embodying its steady increase. Affected by the financial crisis in the first half of 2009, several domestic banks had negative growth, some even decreased almost by 40 percent. But ICBC got an increase of 2.8 percent in the hard first half of last year, which demonstrated its ability of countering the economic fluctuation of its business model and developing pattern. The economic situation in China becomes sound in this year, and ICBC has already achieved an increase rate of 27.3 percent based on its primary higher profit, which reflecting its robust operation and development.
At the same time, we also noticed that the asset quality also endured the economic fluctuation, and became steadily better. And the rapid increase of profit was got when the provision coverage ratio is increasing steadily, so the increase is sustainable. In more specific term, by the end of June, 2010:
The rate of non-performing loans of ICBC fell to 1.26 percent; the percentage was 0.28 smaller than that of the end of 2009. The asset quality is better than its competitors. At the same time, the provision coverage ratio surged to 189.81 percent, and the percentage was 25.4 larger than that of the end of 2009. The remaining sum of provision was almost 1.9 times the remaining sum of non-performing loans, which not only increased its ability of fighting risks but also provided sound financial basis for the further development.
ABC’s remaining sum of non-performing loans is RMB 107.086 billion, decreasing by RMB 13.155 billion on the basis of the end of last year. The rate of non-performing loans is 2.32 percent, and the percentage is 0.59 smaller than that of the end of last year; the provision coverage ratio is 136.11 percent, and the percentage is 30.74 larger than that of the end of the last year;
BOC’s rate of non-performing loans is 1.20 percent, and the percentage is 0.32 smaller than that of the end of last year; the provision coverage ratio is 188.44 percent, and the percentage is 37.27 larger than the end of last year;
CCB’s remaining sum of non-performing loans fell to RMB 65.168 billion, decreasing by RMB 6.988 billion; the rate of non-performing loans fell to 1.22 percent, by 0.28.
According the analyst, the surplus of the four national banks keep on increasing strongly mainly because they put more stress on adjusting the credit structure so that they grant loans more reasonably and safely and the profits from loans are surging.
Some persons in charge of ICBC admit that the earning rate of the loans rises steadily attributes to the adjustment and optimization of the credit structure, and that the earning rate of loans rose by 6 basis points in the fast half year compared with the first quarter, so that the net earning rate of interests rose by 11 basis points to 2.37 percent, which reveals that the efficiency of ICBC’s asset allotment and ability of profit making are increasing noticeably.
CCB also has its own characteristics as for adjusting the credit structure. In the first half year, CCB carefully applied the macroeconomic policies of the country to match up the transformation of development pattern and the restructuring of industries, actively practiced the credit policy of ��to gain, to preserve, to control, to press, to retreat��, and strictly controlled the loans in risking fields to guarantee the right quantity, structure, steps and quality of loans. They strictly controlled the loans related to government financing and rigidly required valid loan guarantee so that both the sum of the customers and loans have decreased; they also keep a list of reliable real estate developers so that loans granted to real estate developing had the smallest increase in the past five years.
BOC further strengthened the management of the loans granted to overcapacity enterprises, strictly controlled the new loans granted to these enterprises, continued the high threshold, and forbade the loans for the low-level repeated construction projects. BOC also strengthened the adjustment of credit structure, and withdraw from the projects that don’t correspond to the country’s industrial policies, so that the credit structure has been optimized.
At present, China’s economy is in an important period of steady and better growth after recovering. It can be predicted that the relationship between steady and rapid growth, restructuring, and inflation control will be more skillfully dealt with, and that the macro economy will develop into the expected direction with the wise application of the good policies. And the better trend of the national economics provides a sound managing environment for sustainable development of the banking industry. Therefore, the four national banks will embrace broader development if they can further the restructuring and transformation of services, enhance the asset liability management, improve innovation and risk management, and consolidate the basis of development.
By Wang Zhi