SHANGHAI/BEIJING, Aug 30 (Reuters) – 4 of China’s 5 largest lenders reported a decrease second-quarter revenue this week after responding to a authorities nudge to decrease lending charges with a purpose to stimulate weak mortgage demand amid a slowing financial system and struggling property sector.
Nonetheless, all 5 lenders introduced interim dividends for the primary time in additional than a decade, in step with state-owned enterprises after the securities regulator final yr referred to as for a lift to investor returns as inventory markets fluctuated.
China since final yr has rolled out a string of property stimulus measures and minimize benchmark lending charges and mortgage charges to spice up progress on the planet’s second-largest financial system. The nation is verging on deflation and faces a chronic property disaster, surging debt and weak shopper and enterprise sentiment.
Financial institution of China and the Financial institution of Communications (BoCom) additionally posted decrease income within the second quarter earlier this week though AgBank bucked the development with a 14.2% improve on Friday.
ICBC’s internet curiosity margin (NIM) – a key gauge of profitability – narrowed to 1.43% on the finish of June from 1.48% three months earlier, whereas CCB’s was additionally decrease.
Though the opposite three banks reported a secure margin or slight widening, the stress on NIM is unlikely to let up.
“We forecast additional stress on NIM within the second half of 2024, pushed by mortgage repricing and authorities directives to decrease borrowing prices to help the financial system,” stated Vivian Xue, a director at Asia-Pacific Monetary Establishments, Fitch Rankings.
Larger dividend payouts will add to the squeeze on lenders’ income from weak mortgage demand and decrease lending yields.
“Lowering the dividend payout ratio to alleviate capital stress has by no means been considered one of our coverage choices,” He Zhaobin, board secretary of BoCom, stated at a post-earnings press convention on Wednesday.
The financial institution stated it could make interim money cost of 0.182 yuan a share, totaling 13.52 billion yuan ($1.91 billion), which is anticipated to be distributed early subsequent yr.
PROPERTY WEIGHS
Whereas some banks warned of rising dangerous loans within the property sector, others intend to extend lending regardless of a wider fall in demand for mortgages.
BoC vice chairman Liu Jin stated on Friday that the financial institution plans to extend mortgage lending and shopper loans.
Residential mortgages decreased to 17% of the Chinese language banking sector’s whole loans by end-2023, from 21% two years earlier, in line with Fitch.
In the meantime, BoCom stated it expects extra dangerous debt from builders.
“Though banks’ direct publicity to property builders solely accounts for a small proportion of their mortgage books, the extended downturn within the property sector has maintained the danger of contagion on upstream and downstream sectors,” stated Nicholas Zhu, a banking analyst at Moody’s.
For the massive 5, non-performing mortgage ratios remained largely secure or tipped marginally down.
($1 = 7.0886 Chinese language yuan renminbi)
Enroll right here.
Reporting by Engen Tham and Ziyi Tang; Enhancing by Tomasz Janowski, Kirsten Donovan
Our Requirements: The Thomson Reuters Belief Ideas.
