A new report on the Chinese banking sector points to a surge in net profits as well as a plunge in funds raised via bond issues in the first half of 2021.
The combined net profits of 57 listed banks in China saw growth of 12.21% in the first half of 2021 compared to the same period last year to hit 1.02 trillion yuan, according to figures from PWC’s “2021 Half Year China Banking Sector Review and Outlook” (2021年半年度中国银行业回顾与展望) issued on 23 September.
Their net profits saw almost zero growth in 2020, as a result of the adverse impacts of the COVID-19 pandemic.
“The improvement in the performance of listed banks was on the one hand due to stabilisation of asset quality, and a reduction in provisions for loan impairment losses,” said the report.
“On the other hand, banks are actively driving a transformation in their business, and the contribution made by wealth management operations has increased.
“Agency and entrustment process fees (including agency insurance, agency funds and agency asset management) saw their share of revenues increase, surpassing bank cards to become the most important revenue source…non-interest revenue growth was higher than net interest revenues.”
The report said that growth in the assets of listed banks had returned to pre-pandemic levels, following adjustments to monetary policy settings.
As of the end of June 2021, the total assets of Chinese listed banks had grown 5.85% compared to the end of 2020, with loans growing 7.82%, as compared to 7.63% in the first half of 2020.
Asset quality indicators have shown improvement, following successful efforts to curb the rapid growth of non-performing loans (NPL).
The NPL ratio of 57 listed Chinese banks has fallen to 1.44% from 1.51% at the end of 2020, while the overdue ratio has fallen to 1.45% from 1.49%, and the special mention loans ratio has fallen to 1.88% from 2.07%.
Bond issuance by listed banks – including perpetual bonds, non-public bonds, convertible bonds and tier-2 capital bonds, plunged in the first half of 2021 to 490.38 billion yuan, for a decline of 496.3 billion yuan compared to the first half of 2020, amidst funding difficulties on Chinese capital markets.
The Report points out that the capital standing of Chinese commercial banks will continue to come under pressure over the medium and long-term, as a result of the implementation of Basel III on 1 January 2023, as well as the release of new capital regulations by the China Banking and Insurance Regulatory Commission (CBIRC).