China Construction Bank 2015 net profits fall flat

Shanghai / AFP

China Construction Bank (CCB), the country’s second-largest lender,
reported flat growth in net profit in 2015, as bad loans jumped with economic growth slowing.
The bank’s net profit edged up 0.14 percent year-on-year to 228.15 billion yuan ($35 billion) in last year, slowing from a 6.1 percent annual increase in 2014, according to a statement that was released this week.
CCB, one of the country’s ‘Big Four’ state-owned lenders, said it ‘witnessed a more complex and changing global economic situation’ including volatility in global financial markets and commodity prices.
China’s economy – the world’s second largest – grew 6.9 percent in 2015, the slowest pace in a quarter of a century.
The government is seeking to shift its economic drivers away from cheap exports and massive government investment to domestic consumption but has warned of slower growth under what leaders have dubbed the “new normal”.
“The growth in net profits of banks has dropped significantly due to fast rises in non-performing loans,” said Richard Cao, Guotai Junan Securities analyst.
CCB’s non-performing loan (NPL) ratio reached 1.58 percent last year, up from 1.19 percent in 2014. The bank’s Shanghai-traded shares closed down 1.02 percent this week after the results announcement.
In 2015 CCB, which has its headquarters is in Xicheng District in Beijing, was the second largest bank in the world by market capitalisation and the sixth largest company in the world. The bank has approximately 13,629 domestic branches.
In addition, it maintains its overseas branches at various locations including Barcelona, Frankfurt, Luxembourg, Hong Kong, Johannesburg, New York, Seoul, and a wholly-owned subsidiary in London. Its total assets reached CNÂ¥ 8.7 trillion in 2009.
However, the Agricultural Bank of China (ABC) reported the highest NPL ratio among the four major banks, rising to 2.39 percent at end-2015 from 1.54 percent in 2014.
The bank, which has roots lending in rural areas, said net profit rose just 0.62 percent year-on-year to 180.58 billion yuan in 2015, according to an official statement.
Its share price closed unchanged ahead of the result.
The other two of the ‘Big Four’, Industrial and Commercial Bank of China (ICBC) and Bank of China (BOC), also reported weak rises in net profit and growing bad loans this week. ICBC, China’s biggest bank, said that net profit gained 0.48 percent year-on-year to 277.13 billion yuan in 2015.
BOC, the main foreign exchange bank, reported that its net profit rose 0.74 percent to 170.85 billion yuan. As of December 31, 2009, BOC was the second largest lender in China overall, and the fifth largest bank in the world by market capitalisation value.A series of interest rate cuts aimed at supporting economic growth have also hurt banks’ earnings, analysts said, and the banking sector will continue to feel the pain with China’s economy expected to slow further this year.
“A combination of interest-rate cuts and worsening asset quality will continue to have an impact on profitability in 2016,” ratings agency Fitch said in a note last week.