China Construction Bank Corp., 0939.HK +2.43% the country's largest lender to home buyers, said its net profit rose 14% last year, helped by healthy net-interest income and higher commissions, although it was the slowest profit growth since 2006.
CCB is the first of China's major banks to report 2012 earnings and its results mesh with expectations of the slowest profit growth for banks in at least three years. The liberalization of China's interest-rate policies has eaten into the fat profits from lending that banks have enjoyed, while a tepid economic recovery in the world's second-largest economy has resulted in less demand for loans.
Net profit for the 12 months ended Dec. 31 totaled 193.18 billion yuan (US$31.1 billion), up from 169.26 billion yuan in 2011. That was slightly above the average 192.63 billion yuan forecast of 24 analysts polled by Thomson One Analytics.
CCB said net-interest income rose 16% to 353.20 billion yuan from 304.57 billion yuan, and net-fee and commission income rose 7.5% to 93.51 billion yuan.
"It's inevitable that banks' profit growth slows, given the interest-rate liberalization would hurt their net-interest margin," a primary gauge of banks' lending profitability, said Orient Securities analyst Jin Lin.
Chinese lenders are also setting aside more provisions as a buffer against potential bad loans, analysts said. CCB raised its provisions by 29.85 percentage points to 271.29% last year, according to its annual report.
Analysts said they expect to see resilience in bank earnings this year and in the future amid expectations of milder contractions in net-interest margin and lower credit costs, given a stabilizing economy.
A more relaxed interest-rate policy would prompt China's large banks to look beyond their comfort zones of lending to big state-owned companies and target small- and medium-size enterprises for better returns, which would thus support their net-interest margin, analysts said.
Strong loan numbers in January and February suggest that credit demand is recovering, which will allow banks to charge higher rates, they said.
"In 2013, we'll beef up the restructuring of loan mix and aim to lower capital cost," CCB President Zhang Jianguo said in the statement. Read more [Link]
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