ICBC's Profit Slips as Low Rates Weigh -- Update

By Kimberley Kao

Industrial & Commercial Bank of China, the world's largest bank by assets, posted a fall in first-half net profit, hurt by lower earnings from lending amid declining interest rates in the world's second-largest economy.

Net profit slipped 1.9% from a year earlier to 166.805 billion yuan, equivalent to $23.50 billion, state-owned ICBC said Friday. That slightly beat the 166.46 billion yuan estimate in a poll of analysts by data provider Visible Alpha.

Net interest income, the bank's primary source of earnings, dropped 6.8% to 313.95 billion yuan. Net fee and commission income fell 8.2% to 67.405 billion yuan.

Impairment losses on assets declined 16.5% to 102.07 billion yuan, while the bank's nonperforming-loan ratio fell to 1.35% from 1.36% at the end of December.

Net interest margin came in at 1.43%, down from 1.72% a year earlier. ICBC attributed the decline to factors such as the reduction in the loan prime rate in China and interest-rate adjustment of existing housing loans. The other Big Four Chinese banks also reported deteriorating margins, pointing to the downward trend of loan prime rates as a key factor.

China's major lenders have lowered lending rates in recent quarters as policymakers take steps to prop up a weak housing market and support an economy battling deflation and fragile consumer confidence.

Bank of China and China Construction Bank this week posted slight declines in first-half profit as margins deteriorated. Agricultural Bank of China on Friday reported a weaker net interest margin for the first half, with net interest income steady from a year earlier.

Since the beginning of this year, "fundamental deterioration [such as] net interest margin contraction remains a concern for some long-only investors, although most do not expect any risk event for the Big Four banks in the next one to two years," Jefferies equity analysts said in a recent note.

Shares of China's big four state-owned banks have all outperformed the broader Hong Kong market this year, gaining between 15% and 19% versus the benchmark Hang Seng Index's 5.5% rise.

Write to Kimberley Kao at kimberley.kao@wsj.com

(END) Dow Jones Newswires

August 30, 2024 08:03 ET (12:03 GMT)

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