Date
17 November 2017
The operating environment for Chinese banks is undergoing immense and profound changes, Tian Guoli says. Photo: Bloomberg
The operating environment for Chinese banks is undergoing immense and profound changes, Tian Guoli says. Photo: Bloomberg

Bad loans drag down Bank of China profit growth

Bank of China Ltd. (03988.HK) is the second of the Big Five Chinese state-run commercial banks this week to post its slowest annual profit growth as a listed firm.

As with the country’s No. 3 lender, Agricultural Bank of China Ltd. (01288.HK), which reported its results Tuesday, slowing economic growth and mounting bad loans were the culprits.

Bank of China, the fourth-largest lender by assets, said Wednesday it has stepped up provisions against possible losses from rapidly growing bad loans, The Wall Street Journal reported.

“Chinese economic growth has entered a ’new normal’,” chairman Tian Guoli said in the bank’s earnings report, echoing a phrase President Xi Jinping used to describe slowing economic growth.

“The operating environment for banks is undergoing immense and profound changes.”

The bank’s net profit rose 8 percent last year from a year earlier to 169.6 billion yuan (US$27.35 billion), thanks to higher interest and fee income. 

Non-performing loans reached 842.6 billion yuan at the end of the year, up 250.5 billion yuan from the end of 2013.

The ratio of bad loans to total lending rose to 1.18 percent from 0.96 percent a year earlier.

Bank of China said it had increased its allowance for loan impairment losses in 2014 by 20.48 billion yuan, bringing the total at the end of last year to 188.53 billion yuan, or 187.6 percent of non-performing loans, down from 229.35 percent a year earlier.

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