Chinese banks bears brunt of economic slowdown

Four state-owned banks post profit growth below 1% in first three quarters; mid-sized banks also drag

China's banking industry is bearing the brunt of the country's economic slowdown with its big four state-owned banks reporting profit growth below one per cent in the first three quarters.

Bank of China (BOC), the Industrial and Commercial Bank of China (ICBC), Agriculture Bank of China (ABC), and China Construction Bank (CCB) have reported profits at 0.79 per cent, 0.65 per cent, 0.57 per cent and 0.73 per cent, respectively.

Profits at mid-sized lenders such as China Everbright Bank and Citic Bank, also reported slower expansion.

Their profits were mainly driven by net-interest income, or revenue from borrowers minus interest paid to depositors.

However, as the gap is set to narrow with China's interest rate liberalisation, banks must seek fresh business models for future profit growth, state-run Xinhua news agency reported today.

In the meantime, bad loans have continued to increase due the economic headwinds.

The bad loan ratio at ABC came in at 2.02 per cent as of the end of September, while that of the other three lenders was around 1.45 per cent.

Zhao Xijun, deputy director of the finance and securities institute at Renmin University of China, said it is possible that their non-performing ratio will continue to rise through year end, but will remain within a controllable range.

The data came as China's economy expanded 6.9 per cent year on year in the third quarter of 2015, the lowest reading since the second quarter of 2009.