Bank of China Ltd. reported a 2.6% increase in full-year profit as a drop in impairments helped offset pressure from falling interest rates.
Net income rose to 237.8 billion yuan for 2024, it said in a Wednesday filing. The net interest margin narrowed to 1.4% from 1.59% a year earlier, while the non-performing loan ratio slid to 1.25% from 1.27%.
Chinese banks have been contending with lower loan yields as authorities since late last year cut mortgage interests and key policy rates to inject momentum to the world’s second largest economy. Margins in the $60 trillion sector, a key gauge of profitability, had plunged to a record low of 1.52% at end of last year.
Bloomberg Intelligence expects margins at China’s largest banks to further narrow this year by 13 to 16 basis points, worse than a consensus decline of 9 to 11 basis points, analyst Francis Chan wrote in a note earlier this month.
Peer Bank of Communications Co. last week posted 0.9% growth in its profits as lower credit impairment offset a margin contraction. The other three of China’s largest state-owned banks, led by Industrial & Commercial Bank of China Ltd., are set to release their full-year results on Friday.
BOC said the average rate on its interest bearing assets dropped by 24 basis points last year, mainly due to China’s cuts in its prime loan and mortgage rates.
Bigger than expected impact from the cuts could lead to a 4% to 8% pretax profit miss at the big four lenders this year, according to Chan.
The bank said it actively mitigated risks in key areas including real estate, lower its non-performing loan ratio to the property sector to 4.94% last year from 5.51%.
Its shares are up 16.4% this year in Hong Kong trading.
Beijing is trying to beef up capital strength at its top six lenders, promising an initial batch of 500 billion yuan of special sovereign bonds will be issued to boost their core tier-1 capital levels. While that will allow the banks to make more loans, an injection would also dilute their earnings.
This article was generated from an automated news agency feed without modifications to text.
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