Chinese Banking Sector Profits Drop 9.4% YoY, CBIRC Hails “Sacrifice” of over 870 Billion Yuan for Real Economy


Official data points to a plunge in the net profits of Chinese commercial banks in the first half of 2020, following a push by regulators for lenders to “sacrifice” earnings for the sake of the real economy.

In the first half of 2020 commercial banks posted net profits of one trillion yuan, for a YoY decline of 9.4%, according to data from the China Banking and Insurance Regulatory Commission (CBIRC).

The YoY growth rate also marked a deceleration of 15.86 percentage points compared to the same period last year.

A CBIRC spokesperson said that despite the profit plunge the performance of the commercial banking sector remained steady, with a liquidity coverage ratio of 142.4% as of the end of June; a provisions coverage ratio of 182.4%, and a capital adequacy ratio of 14.21%.

The spokesperson imputed the drop in banking sector to two reasons:

  1. An ongoing transfer of banking sector profits to the real economy, which CBIRC puts at over 870 billion yuan for the first seven months of the year.
  2. Expansion in the provisions and non-performing loans disposal capability.

In the first half of the year Chinese banking sector financial institutions disposed of 1.1 trillion yuan in non-performing loans, for an increase of 168.9 billion yuan compared to the same period last year.

 Chi­nese Pre­mier Li Ke­qiang called for banks to “sac­ri­fice” 1.5 tril­lion yuan in their 2020 prof­its at a State Coun­cil meet­ing on 17 June, in or­der to re­duce the fi­nanc­ing costs of small busi­nesses in China. 

The profit sac­ri­fice is ex­pected to be around 75% of the full year net prof­its of Chi­na’s com­mer­cial bank­ing sec­tor in 2019, which were around 2 tril­lion yuan ac­cord­ing to data from the China Bank­ing and In­sur­ance Reg­u­la­tory Com­mis­sion (CBIRC). 

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