China’s Industrial & Commercial Bank of China Ltd. posted a decline in profit in the first quarter as interest rate cuts weigh on the nation’s biggest lenders.
Net income slid 3.99% to 84.2 billion yuan at China’s biggest bank, according to a Tuesday filing. China Construction Bank Corp. posted a similar decline while Agricultural Bank of China Ltd. and Bank of Communications Co. reported small profit gains. Margins contracted for all the banks from the end of 2024.
The results offer a pulse check on the nation’s largest state lenders as China gears up for a deepening trade spat with the US. Beijing policymakers have vowed to “fully prepare” emergency plans to counter increasing external shocks, including the creation of new structural monetary policy tools and policy-based financial instruments.
Earlier stimulus to boost economic growth, including prime and mortgage rate cuts, has taken a toll on banks. The sector’s margins have slid to the narrowest on record, and profits could be further squeezed after the central bank governor reiterated earlier promises to implement a moderately loose monetary policy.
The US’s tit-for-tat tariffs could deliver a 2.5% to 3% blow to China’s gross domestic product, prompting more easing and exacerbating the margin woes for Chinese lenders, Bloomberg Intelligence analysts led by Francis Chan wrote in a note last week.
The big four lenders led by ICBC could see a margin squeeze of 14 to 18 basis points this year, they added, worse than the consensus decline of up to 14 basis points.
Nevertheless, China has worked toward beefing up capital buffers at the state lenders for them to better service the world’s second largest economy. It kicked off the sale of special sovereign bonds on Thursday, including 165 billion yuan worth of the notes to fund banks’ recapitalization. A total of 500 billion yuan of such bonds will be issued by June 4.
This article was generated from an automated news agency feed without modifications to text.
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