China banks: SMEs are more profitable

Research shows banks can profit up to 30% more from loans to SMEs.

By the end of September, outstanding Renminbi dominated loans for the SMEs have grown by 28 percent this year, according to statistics released by the People's Bank of China (PBOC) and China Banking Regulatory Commission (CBRC), according to report in People's Daily.

China's listed banks including the Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB) and China Minsheng Bank have switched their focus to SME loans. In the first three quarters, ICBC's SME financing increased 27.07 percent, or 493.05 billion yuan (72.23 billion U.S. dollars) and CCB's SME loans increased by 16.5 percent, or 169.3 billion yuan (24.80 billion U.S. dollars). The Bank of Communication recording 126 percent of growth in its "Zhanyetong" program, the increase rate is 15.5 billion yuan higher compared with the same period last year.

Small and medium-sized shareholding banks have also adopted their "blue sea" strategy to support SMEs. By the end of the third quarter, outstanding SME loans issued by China Merchants Bank accounted for 46.82 percent of its total Renminbi loans to domestic enterprises, 3.72 percentage points higher than the beginning of this year. Bank of Beijing reported 83.9 billion yuan of outstanding SME loans, 29.5 billion yuan or 54 percent higher compared with the beginning of 2009.

Researchers pointed out that the wholesale banking business may contribute less and less to the banks' profits, but their interest margin in SME financing business will remain profitable. A survey showed that commercial banks' loan interest rate to SMEs was 10 to 30 percent higher than the benchmark interest rate.