25 Chinese listed banks expanded their total loans portfolio by nearly 3 trillion yuan in the first quarter of the year, with a marked divergence in interest spreads amongst lenders.
The first quarter reports of 25 Chinese A-share banks indicate that their total loan balance increased by 2.93 trillion yuan in Q1 to hit 70.9 trillion yuan in total, for 4.31% growth since the turn of 2017.
During the same period total asset growth was far slower, clocking in at 2.91%, with new loans accounting for 72.24% of asset expansion.
Following a clampdown by PBOC, the interbank assets of Chinese listed banks fell by nearly 570 billion yuan in Q1 2017 to 9.12 trillion yuan in total. The pace of allocations to investment assets eased, with few banks seeing gains of more than 10% in the first quarter.
Interest spreads showed marked divergence amongst China’s listed banks. Those banks that are less dependent upon interbank debt and have more current accounts saw a stabilisation or even increase in net interest margins.
Analysts from Ping’an Securities said that interbank debt remains costly, and that given ongoing financial deleveraging China’s banks will continue to cut back on interbank assets, striving to raise high-yield assets while putting pressure on high interest liabilities.
Analysts consider it unlikely for balance sheets to shrink this year given a revival in Chinese credit demand, and only foresee those banks undergoing adjustments to reduce assets.
Growth in net profits outpaces revenues
In addition to growth in loans outpacing growth in assets, a total of 17 of China’s listed banks saw growth in net profits outpace growth in revenue during the opening quarter of 2017.
Analysts note that this trend first became apparent in the second half of 2016, with figures from Q1 indicating its continuation since the turn of 2017.
While 25 Chinese listed banks saw operating revenues slide 1.78% year-on-year in Q1 2017 to hit 1.02 trillion yuan, net profits attributable to parent companies increased by 2.78% during the same period to reach 384.123 billion yuan.
A drop in earnings from intermediary operations and investment assets held back growth in operating revenues.
The Q1 year-on-year decline in operating revenues can be largely attributed to a number of banks obtaining handsome profits from bond asset transactions during the first quarter of 2016, raising the baseline for investment earnings.
Net revenue from processing fees and commissions fell 1.69% year-on-year to 236.257 billion yuan, with analysts imputing the decline to heavier scrutiny from regulators, hitting asset management and commission sales operations especially hard