China’s big banks post rise in Q3 profits, squeeze on NIM

BEIJING/SHANGHAI (Reuters) -China’s largest lenders posted a rise in third-quarter profits on Wednesday, although margins were slimmer for some.

The frontrunner was Agricultural Bank of China (OTC:ACGBF) Ltd (AgBank), which reported a 5.88% rise in third quarter net profit.

Four of the country’s other biggest banks also reported profit increases of over 1% in the third-quarter.

The world’s largest commercial lender by assets Industrial and Commercial Bank of China Ltd (ICBC), said net profit grew 3.8% year-on-year in the third quarter.

Following suit were the Bank of China (BoC), the Bank of Communications and China Construction Bank (OTC:CICHF) Corp (CCB) which reported 4.38%, 1.2% and 3.79% respectively.

However, three lenders reported a squeeze on net interest margins (NIM)- a key gauge of profitability – and analysts said pressure will continue as government policy initiatives come into play.

BoC posted a NIM of 1.41% at the end of September, from 1.44% at the end of June. Meanwhile, BoCom reported a slight reduction in NIM to 1.28% from 1.29% over the same period.

CCB likewise said NIM fell to 1.52% at the end of September from 1.54% at end-June.

“We expect net interest margin(NIM) pressure to persist in the fourth quarter, as the measures announced by the Chinese authorities to support the economy will likely add to pressure on bank profitability,” said Vivian Xue, a director at Fitch Ratings.

“The effect of the mortgage rate cuts and loan prime rate cuts on NIM will be mitigated by reductions in reserve requirement ratios and deposit rates, but it is unclear whether they will be sufficient to revive credit demand,” she added.

($1 = 7.1224 Chinese yuan renminbi)