Chinese big banks beat bad loan cloud as half-year profits rise

Agricultural Bank posted the largest earnings growth so far.

Reuters reports that three of Chinese big four state-owned banks reported higher profits for the first half of 2018 as their bad loan ratios held steady in stark contrast to the rest of the embattled banking sector.

Agricultural Bank of China booked the largest earnings growth after profits rose 7% YoY to $16.99b (CNY115.8b). China Construction Bank’s profits rose 6% to $21.58b (CNY147b) followed by Bank of China’s earnings which were 5% YoY higher to $16.01b (CNY109.1b). Industrial and Commercial Bank of China has yet to report its financial results.

The big three state lenders also beat forecasts of bad loans dimming their growth prospects as their nonperforming loan (NPL) ratios fell across the board in stark contrast to the NPL ratio of the banking sector which hit a nine-year high at 1.86% in June.

Rural commercial banks and joint stock commercial banks are bearing the brunt of China's bad loan problem as they don't enjoy the enhanced profitability brought about by the macro-economic recovery enjoyed by their larger peers.

Also read: More bailouts loom as staggering bad loans batter Chinese rural banks

Moreover, analysts believe that the use of debt-for-equity swaps as a way to combat balooning bad loans is more accessible to larger state-owned lenders, leaving smaller players to take the largest hit from the bad loan burden. 

Here’s more from Reuters: