Zero profit growth at China banking giants

Shanghai

THE first two Chinese banking giants to report earnings this week have two things in common: zero profit growth and bad loans piling up at more than twice the pace of a year earlier. Industrial & Commercial Bank of China Ltd posted a 31 per cent increase in bad loans in the first half, while Agricultural Bank of China Ltd had a 28 per cent jump, their stock-exchange statements showed on Thursday.

At a press briefing in Beijing, ICBC president Yi Huiman indicated that the lender may have to abandon a target of keeping its nonperforming loan ratio at 1.45 per cent this year, citing "severe" conditions. The level at the end of June was 1.4 per cent. The economic weakness and US$5 trillion stock-market slump that prompted the central bank to cut interest rates and lenders' reserve requirements this week may make it harder for China's banks to revive earnings growth and attract investors. For now, the biggest banks are trading below book value. "We are nowhere near the end of this down cycle, not with the economy wobbling like now," said Richard Cao, a Shenzhen-based analyst at Guotai Junan Securities Co.