China Construction Bank Corp. (CCB, 00939.HK), which reported flat first-half earnings, expects the impact of China’s interest rate cuts to be felt more acutely in the second half of 2015, denting the bank’s income further.
A total of 8 billion yuan of income could be wiped out, with 75 percent of the amount seen knocked in the second half following four rate cuts so far this year, the Hong Kong Economic Journal reported, citing CCB’s chief financial officer Xu Yiming (許一鳴).
The bank previously expected that its net interest margin will narrow 20 basis points. It now projects that 23 basis points of its net interest margin will vanish for the whole year.
The ratio has already slid 13 basis points to 2.67 percent in the first half of this year, as there was a bigger decrease in lending interest rates than the rates offered to bank depositors.
CCB is also expecting more non-performing loan provisions, which surged 18 billion yuan during the first six months of 2015.
It, however, managed to adjust its asset structure to yield 13 billion yuan more from its asset portfolio, leading to a slight growth of 0.9 percent in its overall net profit.
CCB announced Sunday that it posted a net profit of 131.9 billion yuan for the six months to June, compared with 130.7 billion yuan in the same period last year.
Vice president Yang Wensheng (楊文升) said it is likely that the non-performing loans will further rise in the second half of the year, mainly dragged by lending to manufacturing and wholesaling clients.
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