Deposit repricing to positively impact margins, says BoC
Chinese banks face pressure from property sector crisis
Interest margins steady after profit growth slows for banks
Around $8 trillion in time deposits to mature by 2026
Recasts with comments from the management call
By Ziyi Tang and Engen Tham
BEIJING/SHANGHAI, March 30 (Reuters) - China's largest state-owned banks expect interest margin pressure to ease this year, helped by a repricing of nearly $8 trillion of maturing high-priced time deposits, while flagging an uncertain external environment as a challenge.
Interest margins at Chinese banks have been under intense pressure over the past few years due to a real estate debt crisis and sluggish credit demand in a slowing economy.
Agricultural Bank of China 1288.HK and Bank of China on Monday followed China's three other largest banks in posting stabilizing interest margins as net profit growth flagged.
"Deposit repricing will lead to a decrease in deposit interest rates, which will have a positive impact on our bank's stable net interest margin," BoC 3988.HK Vice President Yang Jun told a post-earnings press conference.
The repricing of high-cost time deposits comes after the rates have been steadily lowered by the regulator over the past four years with a view to protecting lenders' profit margins.
Around $7.8 trillion in time deposits at listed banks will mature in 2026, and the rolling over of maturing three-year deposits at current rates will lower costs by roughly 135 basis points compared to 2023 levels, China Galaxy Securities analyst Zhang Yiwei said.
"The contraction in NIM (net interest margin) should ease in 2026, as we expect it comes to the tail-end of the interest rate-cut cycle," said Elaine Xu, a director at Fitch Ratings.
Shares in Agricultural Bank of China, the country's second largest lender by assets, closed up 0.15% in Shanghai before it released the earnings and BoC's rose 1.8%, while the broader Shanghai Composite Index .SSEC closed up 0.24%.
UNCERTAIN EXTERNAL ENVIRONMENT
Bank officials were cautious about geopolitics, as the Iran war casts a shadow over global economic growth prospects.
"The current external environment is fraught with uncertainties," said BoC Vice President Liu Chenggang.
Bank of China President Zhang Hui said the conflicts pose a threat to some of the bank's overseas branches, while supply chain disruptions have affected the safety and operations of Chinese-funded enterprise clients.
Bank of China, the fourth largest of China's five major state-owned banks, has the largest overseas footprint, including branches in Abu Dhabi, Qatar and Dubai.
BoC's net interest margin $(NIM)$ a gauge of profitability - was flat at the end of December from the end of the prior quarter, while AgBank's slipped slightly to 1.28% at the end of last year from 1.30% at the end of September.
Both were largely in line with the other top three lenders.
AgBank's non-performing loan ratio was flat at the end of last year from the end of the previous quarter, while BoC's fell slightly to 1.23% from 1.24% at the end of September.
AgBank said it has intensified effort to provide higher quality services for the real economy and actively innovated financial products to "support the greater self-reliance and strength in science and technology".
Chinese banks are steering more lending toward technology and innovation-oriented firms in response to Beijing's push to aggressively adopt artificial intelligence.
($1 = 6.9119 Chinese yuan renminbi)
(Reporting by Ziyi Tang and Engen Tham; Editing by Sumeet Chatterjee, Susan Fenton and Alexander Smith)
((Ziyi.Tang@thomsonreuters.com;))
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