Slowing economic growth in 2012 takes toll on ABC, BOC results

Two major Chinese State-owned lenders announced their weakest annual profit growth in recent years on Tuesday, amid faltering economic growth in 2012 and as the authorities continue interest rate liberalization.

Agricultural Bank of China Ltd, China's third-largest bank by market value, registered its lowest profit growth in four years, while Bank of China Ltd, the fourth-biggest lender, reported its weakest profit growth in eight years.

The annual statements came after another member of the Big Four, China Construction Bank Corp, reported on Sunday a 14 percent year-on-year net profit increase, its weakest in six years.

In an annual results statement, ABC said it gained a net profit of 145.1 billion yuan ($23.4 billion) in 2012, up 19 percent year-on-year, diving from the 29 percent registered in 2011.

It said increases in net interest income and net fee and commission income had been the main drivers of its growth last year, along with the decrease in provisions for impairment losses on assets.

The lender's net interest margin, a measure of profitability, went down by 4 basis points to 2.81 percent by the end of 2012 from a year earlier, while overdue loans, an indicator of future bad loans, rose by 14.4 billion yuan in 2012.

"The rise in overdue loans has close ties with the economic cycle we've been through, and is also related to our operations to strictly classify lending so that it could reflect the true asset quality," said ABC President Zhang Yun.

He said the level of bad loans among Chinese lenders is "controllable", and their asset quality would improve as the economy recovers this year.

China's economic growth hit a three-year low of 7.4 percent in the third quarter of 2012, along with rising loan defaults of businesses in coastal areas in the manufacturing, wholesale and retail sectors.

The central bank loosened its reins on interest rates twice in 2012 by allowing banks to lend at lower rates while collecting deposits at higher rates.

Moody's Investors Service said last November that it has a "stable" outlook for the Chinese banking system over the next 12 to 18 months, but has given asset quality, profitability and efficiency a "negative" outlook.

Zhang Keqiu, general manager of ABC's financial accounting, expected its net interest margin would remain stable or decline slightly in 2013.

ABC's total assets reached 13.2 trillion yuan, up 13.4 percent, while its non-performing loan ratio declined 0.22 percentage point year-on-year to 1.33 percent.

Its capital adequacy ratio stood at 12.6 percent and the core ratio registered 9.7 percent by the end of last year, compared with 9.5 percent one year earlier.

Zhang Yun said the lender has no plan to raise money through the capital market.

Also releasing its annual results on Tuesday, BOC said it posted a net profit of 139.4 billion yuan last year, up 12 percent year-on-year.

In 2011 its net profit grew 18.8 percent year-on-year, the lowest increase among the nation's four largest State-owned lenders.

In 2012 BOC realized an income of 366.2 billion yuan, an increase of 11.5 percent from 2011.

Its capital adequacy ratio rose 65 basis points to 13.6 percent by the end of 2012 from a year earlier. Its core capital adequacy ratio stood at 10.5 percent, according to the statement.

Its net interest margin expanded to 2.15 percent from 2.12 percent in 2011, while non-performing loans increased by 2.1 billion yuan to 65.4 billion yuan at the end of December from a year earlier.

wangxiaotian@chinadaily.com.cn

(China Daily 03/27/2013 page16)