Bank of China delivers 5% gain in profit as margin stabilises

Bank of China reported a 5 per cent increase in third-quarter profit, as the lender managed to stabilise its net interest margin despite mounting challenges from weakening credit demand.

Net income rose to 60.1 billion yuan (S$10.9 billion), the Beijing-based bank said in an exchange filing on Tuesday (Oct 28). Its net interest margin – a key gauge of lending profitability – was unchanged at 1.26 per cent from the end of June, as was the non-performing loan ratio.

The results provide a snapshot of the financial health of China’s biggest state-owned lenders as the country braces for a deepening trade spat with the US. Policymakers in Beijing have pledged to maintain stable growth and boost domestic consumption as they draft the next five-year development plan.

China’s economy expanded at the slowest pace in a year in the third quarter, official data showed last week. Central bank figures also indicated that new yuan loans to the real economy slid 851 billion yuan from a year earlier in the first nine months, underscoring weak borrowing appetite among households and corporates.

Profitability and asset quality are in focus as investors gauge the resilience of banks in an economy that’s heavily reliant on lending to regain momentum.

Chinese commercial banks reported a combined profit of 1.24 trillion yuan in the first half of the year, down 1.2 per cent from the same period a year earlier, while non-performing loans remained at a record high of 3.4 trillion yuan.

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Industrial & Commercial Bank of China, China Construction Bank and Agricultural Bank of China are scheduled to release their quarterly results on Thursday. BLOOMBERG