Chinese banks post net profit, operating income growth in 2019: report

Sample size was equivalent to 71.37% of total assets and 76.77% of net profit.

Thirty-seven China-listed banks recorded steady growth in net profit and operating income in 2019, indicating that the industry is advancing its transition in fintech and digitalisation, according to a PwC report.

The report covered A-share and H-share listed banks that disclosed their 2019 annual reports as of 22 April, with a sample size equivalent to 71.37% of total assets and 76.77% of net profit of Chinese commercial banks. The lenders were divided into six large commercial banks, seven joint-stock commercial banks, and 24 city and rural commercial banks.

Last year, the listed banks posted a 6.68% YoY increase in net profit to $215.9b (RMB1.53t), with the net profit of large commercial banks surging by more than 5.63%. Net profit of joint-stock commercial banks and city and rural commercial banks rose 11.44% and 5.14% respectively.

Various types of income also steadily increased, with net interest income still the highest in proportion to the rest. Handling fees and commission income accounted for the largest proportion of joint-stock lenders’ income, mainly concentrated in bank card fees. The handling fee and commission income for city and rural commercial banks accounted for a relatively low proportion of their operating income.

Total assets of listed banks registered steady growth of 8.88% YoY to $24t (RMB171t), with the growth rate of joint-stock banks relatively accelerating by 11.09%.

Loan structure was further adjusted last year and the proportion of retail loans kept rising, according to PwC China financial services partner Shirley Yeung. Retail loans of large banks and joint-stock lenders grew 13% and 16% YoY respectively. Loans of city and rural commercial banks increased 28% YoY.

Housing and mortgage loans are still the catalysts for growth, the report said.

As of end-2019, the balance of non-performing loans (NPL) for the six large commercial banks was $132 (RMB938b), a 4.07% increase from 2018. NPL balance of the seven joint-stock commercial banks grew 5.83% to $42.5b (RMB301b). The scale of NPL for city and rural commercial banks surged 20.31% to $13.9b (RMB99b), with both NPL amounts and rates also rising.

However, the coronavirus pandemic has been testing the economic situation in China and abroad, and the listed banks are pressured by the market and regulatory environment, the report said.

More than ever before, the industry needs to push for business transformations and digitalisation, PwC added.

“In 2019, in order to continue to implement the country's strategic development plan for financial inclusion, whilst listed banks have increased credit support for small and micro enterprises, listed banks also need to pay more attention to the credit risk management control of small and micro enterprises, actively identifying and tracking potential credit risk to properly prevent and mitigate possible credit losses,” said James Tam, PwC Hong Kong Financial Services Partner