China’s Banking Sector Sees 5.4% Rise in Net Profits to 2.3 Trillion Yuan in 2022

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China’s banking sector saw an over 5% rise in its net profits in 2022 to around 2.3 trillion yuan, despite the adverse conditions created by a renewed round of Covid-related lockdowns and heightened tensions with the US.

According to figures released by the China Banking and Insurance Regulatory Commission (CBIRC) on 15 February, as of the end of the fourth quarter of 2022, the total domestic and foreign currency assets of China’s banking-sector financial institutions were 379.4 trillion yuan, for a year-on-year (YoY) increase of 10.0%.

The total foreign and domestic currency assets of large-scale commercial banks stood at 156.3 trillion yuan, for a YoY increase of 12.9% to account for 41.2%, of the total. The total assets of joint-stock commercial banks stood at 66.5 trillion yuan, for a YoY increase of 6.9% o account for 17.5% of the total.

As of the end of the fourth quarter of 2022, the non-performing loans (NPL) balance of Chinese commercial banks stood at 3 trillion yuan, for a reduction of 8.3 billion yuan compared to the end of the previous quarter. The NPL ratio of Chinese commercial banks was 1.63%, for a decline of 0.02 percentage points compared to the end of the previous quarter.

The balance of normal loans of commercial banks at the end of the fourth quarter was 179.7 trillion yuan, of which the normal category loan balance was 175.6 trillion yuan and the special mention loan balance was 4.1 trillion yuan.

For full year 2022, Chinese commercial banks achieved total net profits of 2.3 trillion yuan, for a YoY increase of 5.4%. The average return on capital was 9.33%, for an increase of 0.01 percentage points from the end of the previous quarter. The average return on assets was 0.76%, on par with the reading for the end of the previous quarter.

As of the end of the fourth quarter of 2022, the balance of commercial bank loan loss provisions was 6.1 trillion yuan, for a decrease of 7.9 billion yuan compared to the end of the previous quarter. The provisions coverage ratio was 205.85%, for an increase of 0.31 percentage points compared to the end of the previous quarter. The loan provision ratio was 3.36 %, for a decrease of 0.05 percentage points compared to the end of the previous quarter.

The capital adequacy ratio of Chinese commercial banks (excluding foreign bank branches) was 15.17% at the end of the fourth quarter, for an increase of 0.08 percentage points from the end of the previous quarter. The tier 1 capital adequacy ratio was 12.30%, for an increase of 0.10 percentage points, while the core tier-one capital adequacy ratio was 10.74%, for an increase of 0.10 percentage points.