China’s Big Six State-owned Banks Unscathed by Real Estate Debt Woes According to 2022 Results


All six of China’s big state-owned banks have released their financial results for 2022, showing their performance during a year of renewed Covid lockdowns, heightened geopolitical tensions and onerous debt woes for the Chinese real estate sector.

Profit performance

As of the end of March, Agricultural Bank of China (ABC), Bank of China (BOC), Bank of Communications (BOCOM), China Construction Bank (CCB), Industrial and Commercial Bank of China (ICBC) and Postal Savings Bank of China (PSBC) had all released their 2023 performance results.

The big six state-owned banks posted total net profits attributable to shareholders of 1.348296 trillion yuan in 2022, for a year-on-year (YoY) increase of 5.97% and daily profits of around 3.694 billion yuan.

ICBC came first out of the six state-owned banks in terms of net profit attributable to the parent company, at 360.483 billion yuan in total. CCB also surpassed the 300 billion yuan threshold when it came to net profits, ranking second out of the big six at 323.861 billion yuan.

ABC and BOC ranked third and fourth with net profits of 259.14 billion yuan and 227.439 billion yuan respectively, while the fifth and sixth spots were occupied by BOCOM and PSBC, with net profits of 92.149 billion yuan and 85.224 billion yuan,.

Despite ranking last in terms of net profit size, PSBC was the only big six bank to achieve a profit growth rate of more than 10% in 2023, with a YoY increase of 11.89%. ABC, CCB, BOC, ICBC and BOCOM saw net profit growth rates of 7.45%, 7.06%, 5.22%, 5.02%, and 3.49% respectively.

Revenue performance

The big six state-owned banks posted collective operating revenue of 3.691273 trillion yuan, for a YoY increase of 0.29% and daily income of 1.0113 billion yuan.

ICBC, CCB, and ABC took the top three spots in terms of revenue, with figures of 917.989 billion yuan, 822.473 billion yuan, and 724.868 billion yuan respectively. BOC ranked fourth with revenue of 618.009 billion yuan, while PSBC and BOCOM took the fifth and sixth spots with revenue level of 334.956 billion yuan and 272.978 billion yuan respectively.

Although the six state-owned banks maintained revenue growth collectively, there remained marked differences in revenue growth rates. ICBC and CCB – who ranked first and second in terms of revenue size, both saw a YoY decline in revenues of 2.6% and 0.22% respectively.

PSBC, which ranked fifth in terms of revenue, achieved the highest growth rate, with a YoY increase of 5.08%. BOC, BOCOM, and ABC saw more modest revenue increases of 2.06%, 1.33%, and 0.69% respectively.

ICBC highlighted a decline in non-interest income as one of the factors behind the revenue slide. The bank’s non-interest revenue was 224.302 billion yuan in 2022, for a drop of 11% from the previous year.

“Operating revenue for areas including personal wealth management, private banking, corporate wealth management, and asset custody all fell due to the impact of capital market volatility, and fees for investment banking, guarantees, and commitments have decreased, resulting in a decrease in non-interest income,” ICBC said in its annual report.

Asset quality

With the exception of PSBC, the non-performing loan (NPL) ratios of the big state-owned banks all decreased in 2022. However, the NPL ratio and NPL scope for loans in relation to the real estate industry increased for all six banks in 2022.

The NPL’s of ICBC, ABC, BOC, CCB and BOCOM currently all hover just above the 1.3% threshold, at 1.38%, 1.37%, 1.32%, 1.38%, and 1.35%. While PSBC’s NPL ratio increased by 0.02 percentage points in 2022, it stood at the comparatively low level of 0.84%.

All of the big six banks saw increases in their provisions coverage ratio in 2022 with the exception of PSCB, which posted a decrease of 33.1 percentage points to 385.51%. ICBC’s stood at 209.47%, ABC’s at 302.60%, BOC’s at 188.73%, CCB’s at 241.53% and BOCOM’s at 180.68%.

Real estate lending

The NPL ratio and NPL balance for real estate loans made by the big six banks in China both posted gains in 2022, as the Chinese property market faltered and major developers found themselves overwhelmed by debt woes.

BOC ranked first out of the six state-owned banks in terms of real estate NPL ratio at 7.23%, for an increase of 2.18 percentage points from the previous year. It also ranked first in terms of real estate NPL balance at 55.966 billion yuan, for a YoY surge of 61.31%.

The NPL ratio for ICBC’s real estate loans was 6.14%, up 135 basis points from the start of 2022. ICBC said however that the share of its real estate loan balance was relatively small, and the impact on its overall asset quality was limited.

CCB’s 2022 annual report indicated that the NPL ratio of its personal housing loans increased by 0.17 percentage points to 0.37%. CCB president Zhang Jinliang (张金良) said this was in line with expectations, however, and did not have an impact on the stability of overall asset quality.

With regard to the potential for a recovery in the real estate market, BOC president Liu Jin (刘金) said that “following the gradual implementation of various support policies for the real estate market in China, the market will undergo a recovery process, and real estate companies will definitely return to path of normal and healthy development.

“China is now optimizing the supply of real estate and adopting multiple measures, and the real estate industry will operate in a more sound and healthy manner in the future.”

Net interest margins slide

With the exception of BOC, all of the big state-owned banks saw a decline in their net interest margins in 2022. The net interest margins of ICBC, ABC, BOC, CCB, BOCOM and PSBC stood 1.92%, 1.9%, 1.76%, 2.02%, 1.48%, and 2.2% respectively as of the end of 2022. ICBC and ABC saw decreases of 0.19 and 0.22 percentage points respectively while CCB, BOCOM and PSBC saw declines of 0.11, 0.08 and 0.16 percentage points respectively. BOC’s net interest rate margin edged higher by 0.01 percentage points.

ICBC Liao Lin (廖林) said the narrowing of net interest margins was part of a general trend, and ICBC’s decline of around 19 basis points was in line with the overall sector.

With regard to reasons for the narrowing of net interest margins, Liao said that on asset side it was mainly due to the overall decline in market-quoted interest rates, the challenge of balancing quality and prices, and weaker mortgage demand compared to previous years amidst the property market downturn.

On the liability side, there were significant changes in customer deposit preferences, and a sharp increase in the proportion and structure of time deposits. Liao expects net interest margins to continue to narrow this year, and highlighted greater efforts to effectively coordinate the assets and liabilities.

BOC vice-president Zhang Yi (张毅) and CCB CFO Sheng Liurong (生柳荣) both said that net interest margins would come under further pressure in 2023, particularly given the push from the People’s Bank of China (PBOC) to reduce the benchmark loan prime rate (LPR) in order to boost lending.