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Rising bad loans hurt CCB profits
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CHINA Construction Bank (CCB), one of the country’s biggest state banks, said net profit for the first half of the year were flat, hit by rising bad loans.
The bank’s net profit for the January-June period rose just under 1 percent year-on-year to 131.90 billion yuan (US$20.64 billion), the bank said late on Sunday, just a fraction higher than the 130.66 billion yuan for the same period last year.
At the same time, its bad loans rose to 144.40 billion yuan by the end of June, implying a non-performing loan ratio of 1.42 percent, said the statement to the Hong Kong stock exchange, where it is listed.
The ratio was up by almost a fifth from the 1.19 percent at the end of last year.
“As economic growth slows down and certain businesses and industries suffer operational difficulties, the banking industry comes under pressure for maintaining asset quality,” the bank said.
China’s economy grew 7.0 percent in each of the first two quarters, slowing from a 7.4 percent expansion last year, which was its weakest since 1990.
CCB said interest rate reform in China will also affect its performance in the second half as it brings greater competition.
Earlier this month, China allowed interest rates for fixed deposits of more than one year to float freely though other deposit rates are still set based on guidelines from the central bank. The government already allows banks to set their own lending rates, and banks say the moves towards greater liberalization have cut into their profits.
CCB shares fell 2.92 percent by lunch in Shanghai yesterday, although they were up 0.37 percent in Hong Kong.
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