In Focus
RETAIL BANKING | Tony Chua, China

Growth of ICBC, BOC seen to slow down

Lenders have peaked after ICBC and BOC second quarter profit up 38% and 15% respectively.

Top Chinese lenders ICBC and Bank of China signaled a peaking of earnings growth after strong second-quarter profits, as they slow their lending and focus on asset quality.
Chinese banks have benefited over the past year from a jump in interest income and improving margins after the government backed them in a 2009 lending boom to stimulate the economy.

But many fear they may soon have to pay the piper as China tightens liquidity to cool a racing economy, and as regulators require them to prepare for an increase in bad loans if the real estate market starts to decline.

"Banks' profit growth may have peaked as lending is likely to slow in the second half, while there's little room for interest margins to rise further," said Qiu Peng, analyst at Western Securities.

"There's also lingering concern over banks' asset quality in the even of a drastic slowdown in the economy, but so far, there's no signs of deterioration. But such fears will continue to weigh on banking stocks."

Industrial and Commercial Bank of China (ICBC) and Bank of China, the country's No. 1 and No. 4 lenders, posted second-quarter profit growth of 38 percent and 15 percent, respectively, on Thursday on the back of the lending boom.

View the full story in Reuters.

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