Review and outlook of China's banking industry for the first half of 2016
Due to interest rate cuts and VAT reform, Chinese banks' net profit growth has been under persistent pressure in 1H 2016. Listed banks' net interest spread (NIS) and net interest margin (NIM) continue to narrow year-on-year.
Listed banks' credit risk continued to grow in 1H 2016. Most listed banks accelerated non-performing loan (NPL) write-offs and transfers, which helped to ease the growth of NPL. That said, the NPL, as well as special mention loans and loans that have past due but not yet impaired, are still standing at a high level. Given a sluggish economic growth these pressures are likely to increase further in 2H 2016.
Due to the slower growth in net profits in 1H 2016, most listed banks' capital adequacy is under pressure. It is evident that listed banks need to improve their internal capital generating capability and to look for a less capital-intensive growth model.
Previous issues of Banking Newsletter for the China banking community