China's banking sector to keep growing amid challenges

Credit: HelloRF

China's banking sector is projected to keep growing in the rest of 2022 despite challenges facing the country's economic development, industry analysts said.

In the second quarter, Chinese banks may see a slowdown in profit growth compared with the first three months, but the results are expected to remain decent, said May Yan, head of China Financials, UBS.

The investment bank predicts overall earnings growth by major national banks will moderate from the first quarter.

Specifically, top state-owned lenders are likely to record mid-single-digit profit growth for full-year 2022, while joint-stock commercial banks will see their growth rate above 10 percent, and city commercial banks may achieve a 15-20 percent rise.

Further targeted pandemic prevention and control measures, stronger stimulus policies for the property industry as well as loosened regulations on platform companies might play a decisive role for China's economic rebound in the second half, Yan added.

UBS estimates Chinese banks have strong capital buffers to cope with bad loans triggered by the property crisis.

Since mid-July, the cases of mortgage payment suspensions on stalled projects have drawn much media attention.

"We expect limited non-performing loans risk from suspended mortgage payments alone for Chinese banks at roughly 1.5 percent to 2.4 percent of the mortgage or equivalent to 741billion yuan (US$109.2 billion)," the analyst said.

Given the potentially more challenging than expected growth path, Beijing looks set to continue its policy easing, said Jing Liu, chief economist of China at HSBC.

The People's Bank of China, the central bank, unexpectedly cut the one-year medium-term lending facility operation rate on Monday to 2.75 percent from 2.85 percent.

China's banks kick off the interim financial reporting season this week.

Bank of Nanjing, a listed city commercial lender, realized net profit attributable to shareholders of the parent company of 10.1 billion yuan, a year-on-year increase of around 20 percent, according to its recent semi-annual report.

In its newly released financial announcement, Ping An Bank, a joint-stock bank ,said its net profit surged 25.6 percent from a year ago to over 22 billion yuan during the January-June period.