Weak profitability continues to dog Chinese commercial banks

Net profit at Chinese commercial banks remained near flat in the fourth quarter of 2017 as net interest margin, a key profitability metric, was still compressed, China Banking Regulatory Commission data shows.

Weak profitability continues to dog Chinese commercial banks

Net profit at Chinese commercial banks remained near flat in the fourth quarter of 2017 as net interest margin, a key profitability metric, was still compressed, data from the China Banking Regulatory Commission shows.

Meanwhile, there was a silver lining: Asset quality has stopped worsening. Nonperforming loan ratio stood at 1.74% for the fifth consecutive quarter.

Aggregate net income for China's commercial banks clocked in at 320.30 billion yuan in the three-month period ended December 2017, compared with 320 billion yuan a year earlier.

Net interest margin stood at 2.1%, 12 basis points below 2.22% in the fourth quarter of 2016. Having said that, the profitability gauge rebounded for the third consecutive quarter, in part thanks to the country's two interest rate hikes and a pickup in loan growth.

Although China's economic outlook appears brighter in 2018, commercial banks will likely face more challenges as the government will continue to tighten its oversight on the financial system in the medium term.

In 2017, the government rolled out a stream of new rules to clamp down on interbank funding tools, as well as retail and institutional investment products to curtail the bloated financial system.

As of Feb. 14, US$1 was equivalent to 6.34 Chinese yuan.

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