Bank of China Sees Fastest Annual Profit Growth Since 2013

Bank of China Sees Fastest Profit Growth in 2013 on Recovery

Bank of China Ltd. reported its biggest profit increase in almost a decade last year as lending momentum recovered in the second year of the pandemic and a build up in bad loans eased.  

Net income jumped 12.3% from a year earlier to 216.6 billion yuan ($34 billion) in 2021, the lender said in a filing. That beat a median estimate of 209.8 billion yuan and marks the fastest profit growth since 2013.

The results come after rival Bank of Communications Co. last week delivered the strongest annual results in almost 10 years. Another mega bank China Construction Bank Corp. reported a net income of 302.5 billion yuan in 2021 and other banks such as Industrial & Commercial Bank of China Ltd. and Agricultural Bank of China Ltd. will issue earnings on Wednesday.

The nation’s $54 trillion banking sector is reviving after authorities moved to stabilize economic growth and loosened lending restrictions. But challenges are mounting as debt crisis is rippling through the nation’s property market and as a resurgence in Covid infections, which has forced a partial shutdown in financial capital Shanghai, threatens to sap momentum in the world’s second-largest economy.  

“We remain confident on the long term prospects of the Chinese economy,” said Liu Jin, president of Bank of China, at a press conference. The measures from the central government to boost the economy provided opportunities for the banking sector and BOC will maintain “reasonable” growth in new loans and facilitate an economic recovery, he said. 

A Bloomberg gage of Chinese banks listed in Hong Kong has gained 6% this year, bucking a broader market slump.

Bank of China’s non-performing loans ratio fell 0.13 percentage point to 1.33%, according to the filing. Its non-performing loans in the property sector rose by 4.7 billion yuan to 34.7 billion yuan. 

At Bocom, the amount of non-performing loans in real estate increased by 549 million yuan, while the non-performing loan ratio was 1.25%, representing a decrease of 0.1 percentage point from the end of the previous year.

Last week, Bocom President Liu Jun said the lender faces the most challenging year in his 30-year banking career, citing Covid, geopolitical risks and shrinking domestic demand, warning it would be difficult to deliver good results in 2022. 

China dialed back its property restrictions in the third quarter and loosened up on both fiscal and monetary policies to support companies, easing credit risks for banks. Overall non-performing loan ratio for the sector had dropped to 1.73% at the end of the fourth quarter, the China Banking and Insurance Regulatory Commission said last month, down 0.11 percentage point from a year earlier.

Chinese banks recorded a combined 12.6% growth in overall profits last year, bouncing off a low base in 2020, according to the regulator. 

Policy makers have now pledged to stimulate the domestic economy, which is seen expanding 5% this year, could be followed by concrete steps including interest rate cuts, which will further squeeze lenders’ margin. 

©2022 Bloomberg L.P.

With assistance from Bloomberg