Net Profit Growth of China’s State-owned Banks Under 2%

The latest round of annual reports released by listed members of China’s banking sector reveals dismally low profit rates amongst some of the major state-owned banks.

Both the Bank of Communications and the Agricultural Bank of China posted gains in net profits of less than 2% last year.

Agricultural Bank of China realised net profits of 184.06 billion yuan in 2016 for year-on-year growth of 1.8%, while Bank of Communications posted net profits of 67.2 billion yuan, for year-on-year growth of just 1.03%.

A key reason for the dwindling growth of both banks is dwindling levels of interest revenue, which remains the main source of profits for both banks.

In 2016 Agricultural Bank of China saw net interest revenue of 398.104 billion yuan, for a decline of 38.036 billion yuan compared to the previous year.

Bank of Communications realised net interest revenue of 134.871 billion yuan in 2016, for a year-on-year decline of 9.301 billion yuan, or 6.45%.

In sharp contrast both banks posted strong performance for intermediary operations, which are a key area of transition for China’s commercial banks.

In 2016 Agricultural Bank of China saw net revenue from fees and commissions leap by 10.2% to 90.935 billion yuan, to reach nearly 18% of business revenue.

The figure for Bank of Communications rise a considerable 5.05% to 36.795 billion yuan, with particularly strong returns from agency fees and management fees.

Both banks enjoyed a strong year in terms of keeping the lid on non-performing loans, particularly given widespread difficulties with asset quality in the Chinese sector.

Agricultural Bank of China posted a non-performing loans rate of 2.37% in 2016, comprising 3.88% of special-mentioned loans, for a fall of 0.32 percentage points.

Bank of Communications managed to keep its non-perform loans rate at 1.52% by the end of 2016, for just a slight increase of 0.01 percentage points.

 

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