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April 24, 2015

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Profits hard for banks to earn in 2015

PROFITS at some Chinese banks may stop growing or decline this year as their asset quality comes under pressure and they suffer a narrower interest rate margin, PricewaterhouseCoopers said in a report yesterday.

The major listed banks saw a slower growth of 7.29 percent year on year in their combined net profit to 1.18 trillion yuan last year. The growth rate fell from a 12.54 percent increase year on year in 2013.

The slowdown in profit growth last year is set to continue amid deteriorating quality assets, while smaller banks are more vulnerable to revenue challenges from interest rate liberalization and having to bear costs for deposit insurance, PwC said.

“With asset quality continuing to worsen, there is growing pressure on overdue loans which will eventually become non-performing loans,” said Jimmy Leung, PwC China banking and capital markets leader.

“There are a variety of indications that credit risk exposure is accelerating. The banks need to get to grips with credit asset quality pressure.”




 

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