China's top lenders see growth in Q3 net, tapering of bad loans

Four of China's 'Big Five' state-owned banks reported higher quarterly profits and slower growth in bad loans, helped by a resilient economy and checks on the shadow banking sector.

The improved results from top lenders in the world's second-largest economy come after successive interest rate cuts dented their interest margins - a key gauge of profitability - while loan defaults rose sharply among struggling borrowers.

The improvement has been aided by a cocktail of policy measures, such as debt-for-equity swaps for struggling state borrowers.

Industrial and Commercial Bank of China (ICBC), the country's top lender by assets, posted a 3.3 per cent rise in third-quarter net profit, versus flat growth a year-ago.

Agricultural Bank of China (AgBank), China Construction Bank (CCB) and Bank of Communications (BoCom) also reported faster quarterly profit growth than a year ago.

ICBC, CCB and AgBank also reported declines in their non-performing loan (NPL) ratios, as they dispose of more of their bad debt. A crackdown on unregulated shadow banking has also helped.

"The market has been talking about a potential Chinese banking crisis caused by NPLs since 2011," said Jiahe Chen, chief strategist at Cinda Securities. "But after seven years and banks' net assets increased by over 100 per cent, it's now one of the most worthwhile investable industries."
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