Analysis of China listed banks' results for the third quarter of 2016
Due to the economic downturn, interest rate cuts and value added tax (VAT) reforms, Chinese banks’ net profit growth remained weak. The sample of our analysis consists of 26 A-share and/or H-share listed banks that announced their 2016 Q3 financial results as at October 2016, including five Large Commercial Banks (LCBs), nine Joint-stock Commercial Banks (JSCBs), eight City Commercial Banks (CCBs) and four Rural Commercial Banks (RCBs).
The aggregate net profit of the 26 listed banks reached RMB 1.12 tn in the first three quarters of 2016, a year-on-year increase of 3.90%. A cross-sectional comparison indicates that eight CCBs recorded the fastest growth rate, and were the only group of banks who maintained a double-digit growth, followed by four RCBs and nine JSCBs. The net profit growth of five LCBs was relatively slow.
Due to the slowing of net profit growth, the profitability indicators of most listed banks fell in the first three quarters of 2016. As the effect of interest rate cuts and the impact of VAT reforms gradually become evident, the net interest income of all listed banks, similar to the case in 1H 2016, continued to grow slowly. Most of their growth came from fee and commission income and other non-interest income.
Total assets grew steadily for the first three quarters of 2016. By the end of September 2016, the total assets of the 26 listed banks reached RMB 137.02 tn, increasing by 9.84% and 2.12% respectively when compared to the end of December 2015 and the end of June 2016. All of listed banks continue to face the pressure of non-performing loans (NPLs) with its balance growing. As a result their provision coverage ratios were declining.
Within Q3 2016, listed banks continued to strengthen their capital base by issuing preferred shares, tier-2 capital bonds, common shares and IPOs.
Previous issues of Banking Newsletter for the China banking community