Breakingviews | ICBC/BoC

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29 Oct 2009 12:21

After the flood

Context News

Industrial and Commercial Bank of China (ICBC) reported earnings of Rmb33.8bn ($5bn) for the three months ending September 30, a 20% increase on the same period in 2008. A fall of 4.3% in net interest income was offset by higher fees and commissions, and an increase in the value of investment securities.

Bank of China (BOC) posted earnings of Rmb21bn ($3bn) for the quarter, an year-on-year increase of 19%. Loans in the year up to September grew 43% against the whole of 2008, almost twice the loan growth ICBC reported. Together, the two banks lent out Rmb9 trillion ($1.3 trillion).

Both banks reported a fall in bad debts as a percentage of gross loans. At BOC, the ratio fell to 1.3%, from 1.8% in the second quarter, with non-performing loans covered 1.4 times by accounting provisions. ICBC’s ratio fell to 1.68% from 1.81%, with non-performing loans covered 1.5 times.

ICBC and Bank of China have made up for falling interest margins by lending 30% more this year than in the whole of 2008, boosting their Q3 earnings. But lending must slow, and the banks will need to chase fees to keep profits afloat. That may tempt them to take bigger risks.

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