China’s Weak Economic Growth Breeds Banks Trouble

In light of weak economic growth and turbulence in the market, Banks in China experienced anemic or zero profits growth in their recent quarterly reports.

Photo Credit: Relammik.
Photo Credit: Relammik.

China Construction Bank Corp., the nation’s second-largest lender, is the latest to join the list of banks that is showing zero profit growth.

The bank reported Net income of 64.9 billion yuan ($10 billion), for the three months period ending June 30, unchanged from a year earlier.

Construction Bank’s nonperforming loans jumped 28 percent in six months to 144.4 billion yuan as of June 30, its recent release showed.

That boosted the lender’s bad-loan ratio to 1.42 percent of outstanding credit from 1.19 percent at the end of last year.

In addition, Industrial & Commercial Bank of China Ltd. posted a profit that reflected little change.

At the same time, Agricultural Bank of China Ltd. Showed a 0.8 percent decline in earnings.

The combined earnings of China’s five biggest banks according to analysts are projected to rise 2 percent this year, the least since at least 2004.

The banking giant — China’s number two by market capitalization — also joined peers in reporting a decline in its net interest margin, which slipped to 2.67 percent as of June 30, from 2.8 percent a year earlier.

Press report suggests that industrial overcapacity, a build-up of corporate debt and a $5 trillion stock-market slump have placed China’s leaders in quandary in arresting the economic slowdown.

Yvad Billings, Readers Bureau, Fellow

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