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Banking & finance
BusinessBanking & Finance

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
Georgina Lee
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).
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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.

Workers in protective gear at an entrance to a residential neighbourhood placed under lockdown due to Covid-19 in Shanghai, China, on July 6, 2022. China’s strict Covid policy is likely to hamper growth. Photo: Bloomberg
Workers in protective gear at an entrance to a residential neighbourhood placed under lockdown due to Covid-19 in Shanghai, China, on July 6, 2022. China’s strict Covid policy is likely to hamper growth. Photo: Bloomberg

The NPL ratio improved to 1.41 per cent, from 1.54 per cent a year ago, but was largely flat compared to the end of 2021. Net interest margin, a key gauge of a bank’s profitability, stood at 2.03 per cent, edging down from 2.12 per cent.

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His comment echoed concerns expressed by officials at Bank of Communications, who pointed to the risk of higher delinquencies by some retail borrowers because of the economic impact of Covid-19 restrictions.
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