Bank of China sees fastest profit growth since 2013 on recovery

[BEIJING] Bank of China reported its biggest profit increase in almost a decade last year as lending momentum recovered in the second year of the pandemic and a build up in bad loans eased.

Net income jumped 12.3 per cent from a year earlier to 216.6 billion yuan (S$46.3 billion) in 2021, the lender said in a filing. That beat a median estimate of 209.8 billion yuan and marks the fastest profit growth since 2013.

The results come after rival Bank of Communications last week delivered the strongest annual results in almost 10 years.

China's other mega banks, such as China Construction Bank will report later on Tuesday (Mar 29), and Industrial & Commercial Bank of China and Agricultural Bank of China will issue earnings on Wednesday.

The nation's US$54 trillion banking sector is reviving after authorities moved to stabilise economic growth and loosened lending restrictions. But challenges are mounting as debt crisis is rippling through the nation's property market and as a resurgence in Covid infections, which has forced a partial shutdown in financial capital Shanghai, threatens to sap momentum in the world's second-largest economy.

Last week, Bocom President Liu Jun said the lender faces the most challenging year in his 30-year banking career, citing Covid, geopolitical risks and shrinking domestic demand, warning it would be difficult to deliver good results in 2022. A Bloomberg gauge of Chinese banks listed in Hong Kong has gained 6 per cent this year, bucking a broader market slump.

China dialled back its property restrictions in the third quarter and loosened up on both fiscal and monetary policies to support companies, easing credit risks for banks.

Overall non-performing loan ratio for the sector had dropped to 1.73 per cent at the end of the fourth quarter, the China Banking and Insurance Regulatory Commission said last month, down 0.11 percentage point from a year earlier.

Chinese banks recorded a combined 12.6 per cent growth in overall profits last year, bouncing off a low base in 2020, according to the regulator.

Policy makers have now pledged to stimulate the domestic economy, which is seen expanding 5 per cent this year, could be followed by concrete steps including interest rate cuts, which will further squeeze lenders' margin. Bank of China said its net interest margin narrowed to 1.75 per cent at the end of December. Non-performing loans ratio fell 0.13 percentage point to 1.33 per cent, according to the filing. BLOOMBERG