BEIJING • Four of China's top five state-owned banks, including Industrial and Commercial Bank of China (ICBC) and Bank of China (BOC), posted a better-than-expected rise in quarterly profits as margins and bad loan levels stabilised.
Net interest margins (NIMs) - the difference between interest paid and earned by banks - have fallen sharply for Chinese banks following six benchmark interest rate cuts in 2014-15. But signs of recovery are evident from the half-yearly results of ICBC and BOC, both of which saw the gauge of profitability widen.
ICBC's NIM increased to 2.16 per cent by end-June, from 2.12 per cent at end-March, while BOC's rose to 1.84 per cent from 1.80 per cent over the period.
ICBC, China's top bank by assets, posted a net profit of 77.2 billion yuan (S$15.8 billion) in the second quarter, up 2.3 per cent from a year ago, Reuters' calculations based on ICBC's six-month results show. BOC, the fourth-biggest lender by assets, reported a whopping 23 per cent bump in quarterly profit to 57 billion yuan, blowing past analysts' estimate of a 3.7 per cent increase.
Among China's other state banks, the Agricultural Bank of China and Bank of Communications, the country's fifth-biggest lender, also turned in consensus-beating quarterly profit numbers.
All four lenders reported lower or steadying non-performing loan ratios at the end of June. "The demand for loans is stronger than in past years. Meanwhile, local governments are also increasing investment and Chinese companies are going overseas, so BOC's loan in the first half grew relatively fast," BOC vice-president Gao Yingxin said.
Shares of the "big four" last traded at an average of 0.8 times their estimated book value in Hong Kong, compared with a low of about 0.68 times six months ago.