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China Construction Bank profits lifted by economy, debt crackdown
by Staff Writers
Shanghai (AFP) Aug 31, 2017


Debt crackdown bolsters China banks' bottom lines
Shanghai (AFP) Aug 30, 2017 - Three of China's "big four" banks reported higher first-half profits on Wednesday thanks to a resilient economy and a government crackdown on excessive leveraging in the financial system that helped curb bad loans.

Net profit at Bank of China, the country's main foreign exchange bank, grew 11.5 percent year-on-year in January-June to 103.69 billion yuan ($15.7 billion), the company said in a statement to the Hong Kong stock exchange, where it is listed.

The Industrial and Commercial Bank of China (ICBC), the world's biggest lender in terms of total assets, said net profit grew 1.85 percent to 152.99 billion yuan.

Agricultural Bank of China's profit grew 3.3 percent to 108.59 billion yuan.

The banks have benefited from China's faster-than-expected 6.9 percent economic growth in the first half. They said bottom lines were further bolstered by the government campaign to cut mounting debt and dispose of bad loans.

The crackdown has seen tough guidelines laid down, big fines meted out and corporate figures arrested.

Bank of China said its non-performing loans (NPL) came in at 1.38 percent of total lending by the end of June, down from 1.46 percent at end-2016.

The bank said it "focused more attention on risk prevention and actively enhanced its comprehensive risk management" while it "stepped up efforts to collect and resolve NPLs".

ICBC said its NPLs dropped to 1.57 percent by June compare to 1.62 percent six months earlier as "the bank placed risk prevention and control higher on our priority list".

Agricultural Bank of China's NPLs eased to 2.19 percent compared to 2.37 percent at end-2016.

Shares in major Chinese financial institutions have made particularly robust gains in recent weeks as overall investor sentiment has picked up.

"There's a flight-to-safety attitude here," Andrew Collier, managing director of Orient Capital Research, told Bloomberg TV before the banks released their earnings release.

"Go to the big banks, they've got captured deposits from everybody across China, they've got less of the shadow-banking junk on their balance sheets and so people have figured that's the safer bet."

China's fourth "big bank", China Construction Bank, is expected to post results later in the week.

China Construction Bank, one of the country's "big four" financial institutions, reported a moderate first-half profit rise and improving asset quality as a government crackdown on bad debt kicked in.

The bank's earnings were posted Wednesday night, hours after China's three other big state-owned lenders announced similar results for January-June, which they credited to the de-leveraging campaign and stabilising economic fundamentals.

China Construction Bank (CCB) earned a profit of 138.34 billion yuan ($21.0 billion) in the first half, up 3.7 percent year-on-year, it said in a statement to the Hong Kong stock exchange, where it is listed.

That marks a slight improvement on the 1.1 percent increase reported in the first half of 2016.

CCB added that its non-performing loans (NPL) ratio was 1.51 percent in the period, down from 1.52 percent in the second half of 2016, and 1.58 percent in the six months before that.

China's banks, which have generally reported flat results in recent years, have benefited this year from faster-than-expected 6.9 percent economic growth in the first half.

They have said bottom lines were further bolstered by the government campaign launched earlier this year to cut mounting debt and dispose of bad loans.

CCB said it reviewed and tightened up its lending policies and "continuously enhanced its credit structure" during the period.

"In the first half of the year, the banking industry was overall stable with more reasonable growth rate of assets, and the risks were within control," CCB said.

While noting a "complex and grim business environment" worldwide, the bank expressed optimism for the future, saying the Chinese and global economies were expected to strengthen.

Bank of China, Industrial and Commercial Bank of China, and Agricultural Bank of China reported similar net profit gains and improved asset quality for the first half.

Shares in major Chinese financial institutions have climbed in recent weeks on improving sentiment.

However, China Construction Bank dipped 2.14 percent in Hong Kong and 1.42 percent in Shanghai on Thursday morning, roughly in line with shares of the other three lenders.

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