The net profits of China’s regional banks have faltered severely in the first half of 2020, as the COVID-9 pandemic further exacerbated issues that came to the fore in the sector last year.
As of 23 July 26 small and medium-sized regional Chinese banks had released their 2020 first half performance reports, of which 16 saw negative growth in net profits.
Only seven banks saw year-on-year gains in net profits, while only one bank – Foshan Rural Commercial Bank – posted double digit growth.
Out of the 16 banks which saw negative profit growth in the first half of the year six saw declines in excess of 30%, including Shanxi Yuxian Rural Commercial Bank (山西盂县农商行), Shandong Laizhou Rural Commercial Bank (山东莱州农商行), Zhaoqing Rural Commercial Bank (肇庆农商行), Hubei Suizhou Rural Commercial Bank (湖北随州农商行), Bank of Hubei (湖北银行) and Jilin Huancheng Rural Commercial Bank (吉林环城农商行).
One member of the rural banking sector said to state-owned media that operations had been especially difficult since the first quarter due to the impact of the COVID-19 pandemic, putting even greater pressure on smaller-scale lenders.
Regulators have been highly concerned about the uncertain health of China’s regional banks since May 2019, when the problems of Inner Mongolia’s Baoshang Bank prompted Beijing to launch a forcible takeover.
A report from S&P Global indicates that in the first quarter municipal commercial banks saw the fastest rise in non-performing loans (NPL), with a rise to 2.45% by the end of March as compared to 1.88% a year previously.