ICBC sees tough challenges in curbing bad loans as China’s strict zero-Covid policy hinders growth

ICBC posted a 5 per cent gain in first-half net profit to 171.5 billion yuan (US$24.9 billion), in line with expectations

Bank officials point to challenges in capping off souring corporate loans affected by China’s zero-Covid policy

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ICBC’s net interest margin fell to 2.03 per cent in the first six months of the year, compared with 2.12 per cent a year earlier. Photo: Bloomberg

Published: 6:15am, 31 Aug 2022

China’s slowing economy and its stringent zero-Covid policy will prove challenging for banks to prevent loan quality from worsening in the second half, said senior executives of Industrial and Commercial Bank of China (ICBC).

While the non-performing loan (NPL) ratio for ICBC has remained largely stable over the past 12 months, the impact of China’s strict zero-Covid measures will weigh on corporate borrowers from different sectors, said Wang Jingwu, senior executive vice-president and chief risk officer.

“The Covid-19 pandemic measures and the downward pressure on China’s economy means that [maintaining] the loan quality of the affected sectors will remain challenging [for the second half],” Wang said in a media call after the bank released the first-half results.

The world’s largest bank with total assets of 38.7 trillion yuan (US$5.6 trillion) reported a 5 per cent year-on-year gain in net profit to 171.5 billion yuan, in line with analysts’ expectations.