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China’s biggest lenders, including Industrial & Commercial Bank of China Ltd (ICBC), eked out profit growth in the first quarter of 2023 as they wrestled with shrinking margins and the lingering economic impact of China’s exit from Covid zero.
Net income at ICBC rose 0.02% to 90.2 billion yuan ($13 billion) from the year-earlier period, according to an exchange filing. China Construction Bank Corp (CCBC) posted a 0.3% gain, Bank of China Ltd a 0.5% increase and Agricultural Bank of China Ltd a 1.75% gain, according to separate filings. Profit at Bank of Communications Co rose 5.6%.
The results come after most of China’s biggest banks warned of tough times ahead in March after reporting surprisingly upbeat earnings for 2022, many above analyst expectations. Profits in 2022 were boosted as lenders pushed to extend more credit to help cushion the economy from a slowdown triggered by the nation’s strict pursuit of Covid zero.
The shrinking margins were due to the effects of prime rate reductions and the “continuously increasing proportion of time deposits,†ICBC said in a statement. Bocom cited similar factors, adding that the “constant transfer of profits†to the real economy and repricing on existing loans also had an impact.
Although it has been largely shielded from the global banking turmoil of recent months, China’s $55 trillion banking sector faces challenges of its own against the backdrop of a murky economic recovery. Many of its smaller regional banks are struggling, loaded with riskier debt and high exposure to the ailing local government financing vehicles.