Wrapup 1: China's top banks see third-quarter profits jump more than 10%, bad loans steady

Shengjing Bank Co

29/10/2021 12:19

* China's largest lenders all report over 10% Q3 profit
growth
    * NPL ratios steady or falling slightly at end-Q3 vs end-Q2
    * NIM steady or slipping slightly at end-Q3 

    BEIJING/SHANGHAI, Oct 29 (Reuters) - Four of China's largest
state banks saw third-quarter profits rise by more than 10% as
bad loans held steady, even as smaller lenders felt tremors from
the ongoing debt woes at developer Evergrande.
    Industrial and Commercial Bank of China (ICBC)  601398.SS 
 1398.HK , the world's largest bank, reported on Friday a 10.6%
rise in third-quarter net profit from a year earlier, while Bank
of China Ltd (BoC)  3988.HK  601988.SS  said its profit climbed
13.2% and smaller Bank of Communications Co  3328.HK  601328.SS 
(BoCom) saw quarterly profit jump 37.9%. urn:newsml:reuters.com:*:nL4N2RL26H
 urn:newsml:reuters.com:*:nL4N2RL12T
    They followed solid results from Agricultural Bank of China
Ltd (AgBank)  601288.SS  1288.HK  on Thursday, with a 14% rise
in quarterly profit.  urn:newsml:reuters.com:*:nL1N2RO0OL
    The non-performing loan ratios at all four lenders fell
slightly or held steady at the end of the third quarter compared
with the end of the previous three months.
    However, overall, net interest margins - a key indicator of
bank profitability - stabilised or slipped slightly at the end
of the third quarter from the second quarter.
    China Evergrande Group  3333.HK , once the country's
top-selling real estate developer, is reeling under more than
$300 billion in liabilities, fuelling worries about the impact
of its fate on the world's second-largest economy as well as on
global markets.  urn:newsml:reuters.com:*:nL1N2RN0KL
    Mortgage lending at BoCom increased slightly at the end of
the third quarter from a year earlier, while the other three
banks did not post a breakdown on loans. Some local media
reports said that such lending increased and interest rates fell
in some cities, an indicator of a marginal relaxation of control
over credit to the sector.  urn:newsml:reuters.com:*:nL1N2RP08X
      
    SMALL BANK FORTUNES
    While a recent string of developer defaults has had little
impact on China's largest lenders, for some of their smaller
peers it is a different story. 
    The financing models of Chinese developers, including
Evergrande, depended on a constant stream of new sales and new
fundraising to feed their operations. They quickly ran into
trouble when Beijing introduced its so-called "Three Red Lines"
rules last year that capped the amount of debt developers could
take on compared to the amount of cash, assets and equity
capital they held.
    For many smaller provincial lenders, a larger percentage of
their loan portfolios are taken up by loans to developers and
for mortgages than at bigger banks. So recent liquidity issues
of developers have had a big impact on some smaller banks'
bottom lines.
    Evergrande's "liquidity issue has adversely affected
Shengjing Bank in a material way," Evergrande Chairman Hui Ka
Yan said in a September statement, after announcing that the
developer would sell a $1.5 bln stake in Shengjing Bank to help
repay its liabilities to the lender. urn:newsml:reuters.com:*:nL1N2QV00B
    According to a letter from Evergrande to the government of
southern Guangdong province that leaked in September last year,
many small provincial lenders had outstanding loans to
Evergrande as of the end of June 2020. Evergrande has denied the
authenticity of the letter. Sources told Reuters it was
authentic.  urn:newsml:reuters.com:*:nL3N2GL2H9
    Separately on Friday, China toughened rules for its globally
systemically important banks.  urn:newsml:reuters.com:*:nL1N2RP0R3
    

 (Reporting by Cheng Leng, Zhang Yan and Engen Tham; editing by
Jason Neely and Susan Fenton)
 ((cheng.leng@thomsonreuters.com; +8610-5669-2129;))