Bank of China announces first interim dividend even as profits fall

By Bloomberg News

Bank of China Ltd. announced its first interim dividend since listing in 2006, even as it reported profit growth is faltering.
 

The state-owned lender will distribute 1.208 yuan ($0.17) per 10 shares in interim payouts, according to a Thursday exchange filing. First half profits slid 1.24 per cent from a year earlier to 118.6 billion yuan as margins deteriorated.

The move shows China’s largest state banks are heeding calls from regulators to boost investor returns after markets sold off. Still, it adds further pressure on lenders, which have been called on to support the flagging economy and are struggling with record low margins and bad loans.

Smaller peer Bank of Communications Co. on Wednesday announced an interim dividend along with declining profits. Bocom shares dropped 4.8 per cent in Shanghai on Thursday.

All of the big five state lenders have flagged they were considering interim dividends. Their shares have surged to multi-year highs this year on payout bets as yields on the country’s sovereign bonds have tumbled near record lows.

Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. and Agricultural Bank of China Ltd. are slated to report their first half earnings on Friday. 

BOC rose to the highest since July 2015 in Shanghai earlier this month. It fell 4.1 per cent on Thursday, alongside losses in the sector, after Bocom reported a drop in profit.  

Margins
 

BOC’s interim dividend, about 34 per cent of profits, is still subject to approval by its shareholders’ meeting and will be payable to investors in Shanghai in January and in Hong Kong in February. 

The lender’s net interest margin narrowed to 1.44 per cent at the of June from 1.67 per cent a year earlier, as mortgage rate adjustment and lower loan prime rates weighed on loan yields. Its non-performing loan ratio eased to 1.24 per cent from 1.27 per cent in December.

BOC said Sunday that Liu Jin has stepped down as president due to personal reasons, after more than three years in the job. Chairman Ge Haijiao will be acting president for the time being, it said. 

Combined profits at China’s commercial lenders rose 0.4 per cent in the first half, the slowest pace since 2020, according to official data. The sector’s margins dropped to a record low of 1.54 per cent as of June, constraining room for banks to boost dividend payouts. 

Higher dividend distribution could also erode capital buffers at the systemically important banks which are already rushing to issue debt to plug a $224 billion so-called loss absorbency shortfall before end of the year to meet regulatory requirements.