China's biggest banks post higher Q1 profits amid fresh loan push

Shanghai

CHINA'S largest lenders posted increases in first-quarter profit and higher interest income as authorities encouraged fresh lending to support the economy.

Industrial & Commercial Bank of China, Agricultural Bank of China, Bank of Communications and Bank of China reported that net income rose as much as 4.9 per cent in the three months ended March 31. That compares with the average 5.7 per cent pace predicted for the country's listed banks by China International Capital Corp. China Construction Bank is also due to report this week.

Combined earnings at the five biggest lenders, which together control more than a third of China's US$40 trillion in banking assets, are estimated to grow in 2019 at the fastest pace in five years. Policymakers' renewed push to spur credit is helping the world's No 2 economy to rebound, though banks would look to keep a lid on bad loans.

"Banking stocks are likely to deliver both absolute and relative returns in the phase of monetary and credit easing," CICC analysts led by Victor Wang said in an April 22 note to clients.

Profit at the big five will probably increase about 6 per cent in 2019 after a 4.9 per cent gain last year, according to data compiled by Bloomberg.

However, shares of China-listed banks have gained an average 19 per cent this year, underperforming the 25 per cent increase in the benchmark Shanghai Composite Index.

Investors are concerned that banks' increased lending to smaller businesses, under a push by the government, may hurt their asset quality and profitability in the longer term. Some analysts are also predicting a turn in monetary policy to avoid over-stimulating the economy.

Banks advanced 5.8 trillion yuan (S$1.2 trillion) of new loans in the first quarter, almost a fifth more than the same period a year ago, official data show. China's Politburo said earlier this month that the economy was better than expected in the first quarter, fuelling concern that the government will dial back economic support measures. BLOOMBERG