Chinese Banking Sector Sees Net Profits Rise 12.6% in 2021, Non-performing Loan Ratio Continues to Decline

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The Chinese banking sector bounced back into profitability in 2021 as the economy continued to recover from he impacts of COVID-19.

In 2021 China’s commercial banks saw net profits of 2.2 trillion yuan, for year-on-year (YoY) growth of 12.6%, according to figures released by the China Banking and Insurance Regulatory Commission (CBIRC) on 11 February.

This compares to 1.94 trillion yuan in net profits in 2020, when YoY growth was -2.7%, as the Chinese economy struggled with COVID-19 and regulators called for lenders to “sacrifice” profits to the real economy.

The average return on capital for the Chinese banking sector was 9.64% as of the end of 2021, for a decline of 0.46 percentage points compared to the previous quarter, while the average return on assets was 0.79%, for a decline of 0.03 percentage points.

Non-interest income as a share of net profits fell below the 20% in 2021, declining to 19.81%, as compared to 26.62% in the fourth quarter of 2020.

The non-performing loan (NPL) balance for Chinese commercial banks was 2.847 trillion yuan as of the end of 2021, for an increase of 13.5 billion yuan compared to the end of the preceding quarter.

The NPL ratio was 1.73%, for a decline of 0.02 percentage points compared to the end of the preceding quarter. 2021 saw a continuation of the trend of NPL ratios declining despite an increase in the NPL balance.

2021 also saw the disposal of 3.1 trillion yuan in non-performing assets, for the second consecutive year that the figure has ridden above the 3 trillion yuan threshold.