Chinese banks with more shrewd NPLs see slim earnings hike

But banks are still likely to slash dividends.

Chinese banks with more prudent non-performing loan (NPL) recognition saw slightly higher earnings than their peers, according to a Jefferies report, but banks are likely to slash dividend payments this year.

Around 30% of city and rural commercial banks reported YoY growth in H1 earnings. Large lenders, especially SOE banks, are supposed to carry more weight to support the real economy, analysts said. Smaller banks, for their part, see more capital pressure and earnings are important for capital raising.

Banks are highly likely to cut dividends for FY2020, with analysts expecting no dividend for this year but a recovery in FY2021 assuming -10% profit YoY. In its results briefing on 28 August, Bank of Communication (BoCom) management revealed that regulators have urged leaders to retain more profit to boost capital considering challenges ahead, though the final decision will be made next March.