Chinese banks to see lower profits this year

The banking sector could see a large drop in profits this year due to domestic and international financial turmoil.

The China Banking Association said Chinese banks face severe challenges from the economic slowdown both at home and abroad. As a result, growth in their profits is likely to drop significantly this year.

Growth in credit demand is also expected to drop due to slow export growth, lower investments and weak consumer consumption.

The association expects outstanding non-performing loans to rise slightly. Bank capital quality, however, is not predicted to significantly deteriorate.

Growth in assets generating interest income will continue to slow, as will growth in intermediary services, the association said.

The forecast comes on the heels of news that Chinese banks took almost a third of global bank profit in 2011, up from 4% in 2007.