Business / Markets

Lenders may see slower profit growth this year

By Gao Changxin (China Daily) Updated: 2014-07-01 07:38

The China Banking Association said on Monday that banks' profit growth might further decelerate to 9 percent this year, following a slowdown in the economy that limits loan book expansion.

Profits grew 15.4 percent in 2013, when the banking sector raked in 1.74 trillion yuan ($280 billion) in profits, and 20.7 percent in 2012.

But still, the sector will probably remain one of the world's most profitable. The aggregate pretax profit of Chinese banks last year accounted for 32 percent of the industry's global earnings, according to The Banker magazine's annual rankings of the profits and capital strength of the world's biggest 1,000 banks.

Industrial and Commercial Bank of China Ltd was the most profitable bank last year, raking in $55 billion, according to the report, published on Monday.

According to the CBA report, interest rate liberalization is crimping lenders' net interest margins, the spread between deposit and loan rates. The key source of income will likely drop 0.05 to 0.07 percentage point this year, from 2.68 percent at the end of 2013.

Bad loans will probably rise further, said the CBA, especially to sectors with overcapacity and small and medium-sized enterprises that are dependent on overseas demand.

Lenders may see slower profit growth this year Lenders may see slower profit growth this year
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