Top Chinese lenders ICBC (1398.HK) and Bank of China (3988.HK) signaled a peaking of earnings growth after strong second-quarter profits, as they slowed their lending and focused on asset quality.
Chinese banks, which are trying to become more commercial and move away from their policy-based lending past, have benefited over the past year from a jump in interest income and improving margins after a government-backed lending boom in 2009.
But many fear they may soon have to pay the piper as China tightens liquidity to cool a racing economy, and as regulators require them to prepare for an increase in bad loans if the real estate market starts to decline.
“Banks’ profit growth may have peaked as lending is likely to slow in the second half, while there’s little room for interest margins to rise further,” said Qiu Peng, analyst at Western Securities.
“There’s also lingering concern over banks’ asset quality in the event of a drastic slowdown in the economy, but so far, there are no signs of deterioration. But such fears will continue to weigh on banking stocks.”
Industrial and Commercial Bank of China (ICBC) (601398.SS) and Bank of China, the country’s No. 1 and No. 4 lenders, posted second-quarter profit growth of 38 percent and 15 percent, respectively, on Thursday on the back of the lending boom.
The results capped a season of strong quarterly earnings by Chinese banks, reflecting an economy that grew by 10.3 percent during the second quarter.
BANKS BRACE FOR HANGOVER
China’s banking industry has evolved in the last decade from its roots as a policy-oriented lending machine to one that tries to be more market-focused, with most of the nation’s top banks going public to highlight their new commercial bent.
The conflict between policy- and market-oriented lending continues to hound many, which count the government as their major shareholder.
Chinese banks made a record 9.6 trillion yuan in new loans during last year’s lending boom, nearly double the volume of 2008. The government is aiming to slow the pace somewhat this year, with a target of 7.5 trillion in new loans for 2010.
Now the banks are bracing for a hangover that many observers see as all but inevitable, with bad loans likely to rise sharply from current low levels as questionable loans made in 2009 comes home to roost.
The magnitude of any looming hangover will largely depend on Beijing’s skill at cooling the economy: if it applies the brakes too quickly, tumbling markets could cause bad loans to balloon, whereas a softer landing could lessen the blow.
“Risks for China’s banking sector are seen as manageable, barring a serious macroeconomic downturn,” said Nan Sheng, an analyst at UOB Kay Hian.
STRESS TESTS
Responding to Beijing’s shift toward monetary tightening, China’s banking regulator conducted stress tests on banks this month, asking them to evaluate the impact on their balance sheets in the event of a 60 percent slump in home prices.
The regulator is also diagnosing the health of an estimated $1 trillion worth of loans to local government infrastructure, though results of both tests have not been made public.
To ward off risks, regulators have urged banks to strengthen their books weakened by last year’s lending binge, triggering a fundraising rush among lenders to raise more than $80 billion dollars in total to buffer potential losses.
All the tightening signs bode poorly for earnings growth in the near term.
“Profit growth in the second half is set to be lower than that of the first half,” said UOB’s Nan.
The HSI-Finance Index .HSNF which tracks major Hong Kong-listed Chinese banks, is down 10.4 percent this year, nearly double the 5.7 percent drop in the main Hang Seng Index .HSI, as investors worry about the sector’s health as well as massive planned capital-raisings to replenish their balance sheets.
ICBC, in which Goldman Sachs (GS.N), Allianz Group (ALVG.DE) and American Express (AXP.N) hold stakes, and BOC are raising funds through shares and bonds issues, following on from Agricultural Bank of China’s (601288.SS) (1288.HK) record IPO in July.
Three of China’s “Big Four” state banks — ICBC, Bank of China and China Construction Bank (0939.HK)(601939.SS) — have so far reported second-quarter profit growth ranging from 15-38 percent, while smaller rivals such as China Merchants Bank (600036.SS) and Everbright Bank posted even faster growth.
Banks also benefited from a rapid increase in non-interest incomes as they collected more fees and commissions from selling insurance and mutual fund products.
Shares of ICBC, which has a market value of more than $210 billion, closed down 0.2 percent on Thursday in Hong Kong ahead of the results. The shares have fallen 13 percent so far this year, underperforming the benchmark Hang Seng Index .HSI, which has declined 4 percent.
Bank of China’s Hong Kong-listed shares were unchanged on Thursday, having fallen 5.7 percent so far this year.
($1=6.80 Yuan)
By Samuel Shen and Doug Young
Tags: bank of china, Chinese economy, economy recovery, financial system, Global Economy, money, real estate sector
Great information…
This is often first-class. Members checked out associated with amount therefore we are bowled over. We are most certainly interested in one of these areas. One particular appreciate your selected retailer, and profit your precious time with this. Pleas…
darmowe filmiki porno…
Fajne cipka na filmiku erotycznym, zobacz to….
alexander the great were all intrigued by…
what the art of hand reading had to say about them.bob marley wasn’t always the talented singer we know nowadays. in his earlier days, he was giving palmistry readings to the villagers of nine miles in saint ann parish, jamaica. palm…
Great information…
This is distinctive. We looked at different groups ingredients therefore we are wordless. We are interested in one of these features. Scientists appreciate you own tape, and evaluate the effort inside this. Please keep modifying. These are materially w…
Great information…
This is very nice. Among watch a legal case joyful therefore we are wordless. We are interested in this sort of events. One particular appreciate dieters guide, and prize the effort inside this. Please keep modifying. They may be amazingly valuable inf…
Great information…
This is certainly first-class. Both of us stare upon these tips fulfilled so we are astonished. We’re curious about one of these organisms. Tip appreciate users recommendations, and value for money the effort with this. Please keep updating. They are …
Sites we Like………
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]………
service they offer must be dependable. you…
are sure to get your money’s worth if these three elements are present.visit travel websites and read about motel reviews to help you learn more about different motels in albury. you can be certain that you will find the best motel…
Awesome website……
[...]the time to read or visit the content or sites we have linked to below the[...]………
and 5% respectively. if all things remain…
the same for 2011, this means that you have got to start marketing now as you have between week 48 (thanksgiving) and the two weeks following to make your biggest sales.as far as online marketing and sales is concerned, cyber monday…
nonetheless, this isn’t the most precious, or…
the rarest, of gem stones.speaking of garnets, the “blue garnet” is rather expensive and to date is only found in a few areas on the planet. the color ranges from teal blue to royal, however, under certain lighting the coloring takes…
can benefit from as a contact.stone 3-…
take advantage of low cost advertising methods. there are many online companies that offer really low price (free!!) promotional material. from business cards to t-shirts, flyers, and even mailing lists targeted to a specific locations and groups, thes…
process.this summer is so special because we…
can enjoy our holiday by watching the games. it’s good for people who spending their holiday into south africa and they can see the games alive. in spite of that, we still can enjoy the 2010 soccer tournament right here in…
chemicals in our world that have estrogen-like…
effects on the body. they are called xenoestrogens, and they can be found in fertilizers, lotions, shampoos, and even laundry detergent. when your body comes into contact with these xenoestrogens, it can go haywire if you get too many in your…
is can be surprisingly heavy. the edges,…
even on brand new pane, can still be dangerous at times and it’s not always easy to work a pane into a current window dallas windshield repair frame. that a trained glazier makes home glass repair look simple says a lot more about his…
the largest impounds on the kissimmee river…
in central florida, lake kissimmee has been restored in the past few years with introduction of ecologically favorable vegetation. a few of the popular tourist and fishing spots on or around the lake include the highway 60 bridge area stretching to…
in mind when shopping for your cheap…
costume jewelry in order to ensure that you get the best deal possible.in order to find the best inexpensive jewelry online, you should remain up to date with the latest trends. even if you are not a connoisseur or expert in…
or well prepared through good clothing for…
the cold. for the summer, the temperatures range from a cool 59f (15c) up to a hot 86f (30c) in the warmest month of july. visitors will enjoy up to 19 hours of sunlight in the summer. both temperatures and the…
… [Trackback] …
[...] Read More here: moneyworldnews.com/2010/08/26/chinas-top-banks-face-harsh-reality-after-strong-h1/ [...] …
made you uncomfortable. it’s just that you…
look like someone we went to school with 40 years ago.” then he asked if we would join them for a few minutes. cautiously, danielle and i sat down. we chit chatted for about 10-15 minutes then i explained i had…
are accepted just like regular preprinted coupons…
at grocery stores and supermarkets. if your neighbors, family and friend are not coupon clippers, convince them of the benefits of using coupons and start an informal coupons swap club. if they are not interested, look for a club in your…
or chicken broth 1/3 cup dry white…
wine 1 cup heavy cream 1/2 cup freshly grated parmesan cheese 2 tablespoons each lemon juice and chopped parsley 1/4 teaspoon each dried basil leaves and dried oregano leaves, crushed 1 package linguine pasta (8 ounce size) cooked and draineddirections…
caveman. avoid this section altogether. if the…
smells tend to lure you to this area, go shopping at night when the bakery is done baking and is sometimes even closed. produce - here is where you spend most of your time when shopping for paleo foods. select fresh,…
Online Article…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]…
is held in check by friendly bacteria,…
the natural flora present in the intestine which lives in a controlled, balanced symbiosis with candida.conditions conducive to the over-growth of candida is caused by incorrect diets incorporating high ingestion of sugar and uncomplicated carbohydrate…
are sold. amazon and home depot are…
always viable options, and such major retailers typically offer the best price. if you’re a serious bargain hunter, you’ll want to do some additional research online to find the best deals for buying in bulk or for specific models. whatever you…
mind “can eating yogurt cure a yeast…
infection?” the truth is in order for you to get the most out of the yogurt; you should stick to a simple yet powerful procedure for at least a week. you need to swab the infected area with plain yogurt, do…
weatherizing these standard screens enabling their use…
outdoors. rather than invest in an expensive outdoor tv, simply use a standard lcd or plasma and house it in a weatherproof lcd enclosure.weatherproof lcd enclosures are protective cabinets that house standard screens. available in various sizes, from …
study published by global research agency millward…
brown.operating system: lately, ios 5.0 and its features were announced on june 6 at the wwdc 2011 keynote address. the new operating system comes with icloud service and the notification center, as well as improvements to native apps such as camera….
Great information…
This is often impressive. A particular stare upon good results article content when we are bowled over. We are curious about this sort of meals. Issue appreciate you are business, and prize the effort with this. Please keep updating. They may be remark…
Great information…
This is first-class. Some checked out different groups video content therefore we are startled. We’re interested in this kind of equipment. Sole appreciate you create insert, and benefits the effort with this. Please keep modifying. They’re hugely ch…
in this position, you do have the…
right to refuse to take it. if you believe the results of the test could prove that you are legally over the limit, even slightly, a dui lawyer will advise you not to take the test.think back to your evening. how…
Kamasz…
[...]while the sites we link to below are completely unrelated to ours, we think they are worth a read, so have a look[...]…
by simply eating a handful of raw…
brazil nuts each day.7. magnesium. many people are also deficient in magnesium, which also is important in people with hypothyroidism, including hashimoto’s thyroiditis. it is especially important for the proper utilization of iodine. so anyone who is…
with cathedral, sloped, peaked, gable ceilings at…
or within 3′ from the highest point (measured horizontally). install smoke detectors in each section of the room / area that has been divided by a partial wall. the wall might be coming down from the ceiling (at least 24″) or…
can be readily seen that tobacco is…
bringing harm to our loved ones, and smokers continue to increase in number. cigarette packs are covered with warnings of the harm they can do to our bodies, but we continue to spend money on them. we go out and spend…
why you’re addicted to cigarettes. nicotine is…
responsible for the pleasurable relaxed feeling when you smoke. it releases dopamine into your body which causes these feelings. your body has gotten so accustomed to nicotine that it depends on it to feel normal. the best way to break free…
smokers:- lobelia. contains a substance called lobeline…
which has nicotine-like components but not addictive unlike its nemesis. (caution: this is a strong herb, so this must not be overused.)- kava-kava. an antidote to depression and irritability… feelings that you may have once you stop smoking.- licori…
fall 2011. they also went on to…
say that ps vita’s graphics makes this gaming console the best platform for their game.for a record, sony still has not yet announced the official release dates for ps vita. however, rumors have been floating around that it will be out…
because of preventable mistakes that some charter…
boats won’t tell you to avoid before signing you up. i can tell you right now there are five mistakes that if every deep sea fishing vacationer knew about before they signed up for a charter yacht fishing trip, they would…
are some herbs that are commonly used…
by smokers:- lobelia. contains a substance called lobeline which has nicotine-like components but not addictive unlike its nemesis. (caution: this is a strong herb, so this must not be overused.)- kava-kava. an antidote to depression and irritability…..
… [Trackback] …
[...] Read More: moneyworldnews.com/2010/08/26/chinas-top-banks-face-harsh-reality-after-strong-h1/ [...] …
5 inches diagonally) and better screen resolution….
the cost. in spite of the upgrades the iphone 5 is expected to have, it is said to have the same price as the iphone 4g, which means that buyers can get massive savings even as they get to enjoy the…
more apps. the handset also has a…
great camera and good connectivity, all integrated with its hardware. the iphone 4s offers a unique voice command app called siri which enables you to interact with your mobile like never before. the handset also offers an improved, faster processor, m…
in the casino industry, and how well…
the casino industry is doing will have a 100% impact on the success of your investment and property management efforts.the casino industry in vegas is what we’d call the economic driver.if they’re driving the economy forward, if they’re employing pe…
owner of the website to stay in…
contact with the visitor. it could be argued, that websites without autoresponders do not provide much value for the website owner.driving traffic–the 400 lb gorilla perhaps the greatest challenge of lead generation, via the internet, is the mechanism…
are also free foods like 1 tbsp….
of fat-free mayonnaise or â¼ cup of salsa. in addition, there are ways of determining exchanges for sweets and combination foods (e.g. casseroles, pizza, and soups).for a 1,200 calorie meal plan you may eat: 5 starches 2 fruits 2 milks 5…
Windows 8…
[...]we like to honor other sites on the web, even if they aren’t related to us, by linking to them. Below are some sites worth checking out[...]…