China's AgBank, BoC post higher profits as margins improve

BEIJING (Reuters) - Agricultural Bank of China Ltd (AgBank) and Bank of China Ltd (BoC), the country's third- and fourth-largest lenders, reported higher profits for the first half of the year as margins improved and bad loan ratios held steady.

The stronger earnings come at a time when China is actively pumping funds into the banking system and rolling out support measures for local businesses to cushion the impact from an escalating trade war with the United States.

Net profit for AgBank, the first of the so-called Big Four Chinese state lenders to report interim results, rose 7 percent from a year ago to 115.8 billion yuan ($16.85 billion) for the six months ended June. BoC posted a 5 percent rise in profit to 109.1 billion yuan.

Results for both were underpinned by higher net interest margins (NIM), the difference between interest paid and earned - a key gauge of profitability for lenders.

AgBank's NIM rose to 2.35 percent by end-June from 2.28 percent at end-December, while BoC's NIM rose to 1.88 percent at the end of June from 1.85 percent at end-March.

AgBank did not disclose its NIM at end-March.

The two lenders also posted steady non-performing loan (NPL) ratios, in stark contrast with the broader banking sector, as their diverse revenue sources and strong capital buffers gave them an edge over smaller peers who have been hit hard by a government crackdown on risk.

AgBank's NPL ratio fell to 1.62 percent by end-June from 1.68 percent at end-March, while it remained unchanged for BoC from end-March at 1.43 percent.

By end-June, the NPL ratio for the wider banking sector reached 1.86 percent, data from the China Banking and Insurance Regulatory Commission shows. This was the highest since 2009.

Analysts fear an unrestrained, credit-fuelled growth, could fuel a further build-up in bad loans as the world's No.2 economy cools, undermining Beijing's push to reduce riskier lending and a mountain of debt.

In Shanghai, AgBank shares edged down 0.55 percent on Tuesday, while BoC shares went up 0.28 percent. The Shanghai Shenzhen CSI 300 index closed down 0.19 percent.

($1 = 6.8740 Chinese yuan)

(Reporting By Shu Zhang and Engen Tham; Editing by Himani Sarkar)