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Don Weinland

China Merchants Bank, the country's largest joint-stock bank, on Tuesday said profit growth slowed to 8.26 per cent in the first half of the year while bad debt increased markedly from the end of March.
The Shenzhen-based commercial lender brought in about 33 billion yuan between January and June, showing a significant downshift in the speed of growth compared with a year earlier, when it notched a nearly 15 per cent year-on-year growth.
For the second quarter, pre-tax profit came in lower than the consensus after quicker growth between January and March surprised analysts.
The bank said it would not issue a dividend for the period.
The biggest worry for Merchants Bank this year will be controlling the rate at which its loans deteriorate under pressure from the nation's slowing economy.
After staving off high non-performing loan growth in the first quarter, the bank said its non-performing loan ratio rose to 1.5 per cent by the end of June, a worrying increase of 26 basis points in just three months.
Impairments on loans soared 78 per cent in the first half to 29.2 billion yuan.
The sector-wide non-performing loan ratio for China's commercial banks at the end of June was 1.5 per cent.
One positive signal from Merchants Bank was that it managed to push up its net interest margin, a gauge on loan profitability, by 13 basis points to 2.83 per cent during a time of intensifying pressure on margins. Much of that was due to its strong retail banking business. Retail loans accounted for about 40 per cent of its loan book, up slightly from a year earlier.
But high net interest income was not expected to hold up in the second half of the year.
"It is notable that the negative impact of the central bank's interest rate cuts will become apparent gradually, which is expected to have certain pressure on the net interest margin in the second half," the bank said in the earnings report.
Net interest margin was expected to shrink for many lenders in the first half as the central bank continues to cut interest rates. The People's Bank of China on Tuesday reduced the lending and deposit rates for the fifth time in less than 10 months with the hope of combating a deepening equities rout.
Shares of Merchants Bank fell 1.17 per cent to HK$16.90 before its results announcement.
In Shanghai, the stock closed 1.8 per cent lower at 14.71 yuan on a day the Shanghai Composite Index dropped 7.63 per cent, closing below the 3,000-point mark for the first time since January.
Merchants Bank's shares are down more than 11 per cent in the year so far but still about 37 per cent higher than a year ago.


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China debt

China Merchants Bank shows slowing profits, high bad debt in first half

China Merchants Bank's non-performing loan ratio rose to 1.5 per cent by the end of June, an increase of 26 basis points in just three months. Photo: Bloomberg

Business

Banking & Finance

Mainland lender sees first-half net rise a slower 8.26 per cent from 15 per cent a year ago to 33 billion yuan amid a sharp jump in bad debt


China Merchants Group