INDUSTRIAL & Commercial Bank of China (ICBC), the nation’s largest lender, reported its first decline in quarterly profit in more than a year as margins continue to contract.

Net income fell 2.78 per cent to 87.7 billion yuan (S$16.5 billion) in the first quarter, the Beijing-based bank said in an exchange filing on Monday (Apr 29). Its net interest margin narrowed to 1.48 per cent from 1.61 per cent at the end of 2023.

ICBC and Agricultural Bank of China, which said profit fell 1.6 per cent, last reported declines in the fourth quarter of 2022. It’s the first first-quarter earnings drop since they became publicly traded in Hong Kong more than a decade ago, a period usually marked by a surge in lending. But this time results were pummelled by a combination of weak loan growth, margin contraction and lower fee income.

Domestic rival Bank of China also reported a 2.9 per cent on-year decline in first-quarter net income to 56 billion yuan. China Construction Bank’s first-quarter profit slid 2.2 per cent on-year to 86.8 billion yuan, while its net interest margin narrowed to 1.57 per cent from annual 1.7 per cent in 2023.

Chinese lenders are in the midst of a prolonged squeeze that has narrowed margins to record lows. Beijing has over the past few years called on the banks to cut loan rates and beef up lending support to areas including its cash-strapped property sector and local governments.

AgBank’s quarterly profit fell to 70.4 billion yuan. Its net interest margin narrowed to 1.44 per cent from 1.6 per cent at the end of 2023, while the non-performing loans ratio dropped to 1.32 per cent.

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Bank of Communications on Friday said that net income rose 1.4 per cent in the first quarter.

Combined profits at China’s commercial banks rose 3.2 per cent last year, the slowest pace since 2020, according to official data.

Earnings prospects will likely remain subdued this year. Bloomberg Intelligence estimates bank loan growth to slow to high-single digits in 2024 from 11 per cent last year due to soft demand from both corporate and household segments.

China’s home sales slump dragged on in March, while home price declines deepened from a year earlier for both new and used homes, signalling a much-hoped turnaround for the sector isn’t in sight yet.

The government may press state banks to continue cutting lending rates, further eroding their margins and making it difficult to grow profits, BI analyst Francis Chan wrote in a note. BLOOMBERG