Bank of China back in black, CCB profit also picks up

[SHANGHAI] Bank of China swung back into the black last year while China Construction Bank also joined the country's state-owned lenders in posting a profit pick-up on the back of an accelerating domestic economy.

Bank of China, the country's main foreign exchange bank, swung from a near three per cent net loss in 2016 to a net profit of 172.4 billion yuan (S$35.9 billion), up 4.8 per cent, according to a statement late Thursday to the Hong Kong stock exchange where it is listed.

China Construction Bank (CCB), the country's second-biggest, had earlier reported to the exchange that 2017 net profit grew 4.7 per cent to 242.3 billion yuan, up from less than two percent growth the previous year.

Bank of China credited a "stronger-than-expected" economic expansion, adding that "China's banking industry as a whole remained sound with steady growth in assets and liabilities".

The remaining half of China's "Big Four" banks - The Industrial and Commercial Bank of China and Agricultural Bank of China - had reported improved earnings earlier this week, citing similar factors.

China's economy grew a forecast-beating 6.9 per cent in 2017, picking up steam for the first time since 2010.

All four of the big banks saw profit growth largely flat-line in the preceding two years as concerns grew over rising bad loans.

But both Bank of China and CCB reported lower non-performing loans (NPLs) for 2017 due to "moderate deleveraging in the domestic financial system".

Analysts said the big banks also are benefiting from the Chinese government's campaign to clean up bad loans and risky lending in its often chaotic and murky financial system.

The crackdown is seen as hitting smaller lenders and wealth management companies hardest, driving them to seek loans from the established banks in order to clean up their balance sheets.

China's banking regulator is also believed to have recently lowered bad-loan provisions for banks, according to a Bloomberg News report, which frees up more cash for lending.

Around midday Friday, China Construction Bank's shares had gained 0.25 per cent in Hong Kong and were 0.78 per cent higher in Shanghai, where it is also listed.

Bank of China shares were flat in Hong Kong and lost 1.25 per cent in Shanghai.

AFP