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Six of China’s largest state-owned banks, including the Industrial and Commercial Bank of China and the Agricultural Bank of China, all reported positive growth in both net profit and operating revenue during the first three quarters, showing signs of improvement from the previous half-year. However, declining net interest margins continue to put pressure on their profitability.
Together, these banks recorded a 1.22% increase in net profit attributable to shareholders for the first nine months of the year, reaching approximately $241.8 billion. Their combined revenue also grew by 1.87%, totaling about $384 billion. This marks an improvement from the first half, where net profits dipped slightly by 0.13%, but operating revenues still increased by 1.6%. During this period, all six banks experienced higher revenue, but only half saw profits grow, while the others faced declines.
Bank of China and ICBC saw the most significant revenue growth, increasing 2.69% and 2.17%, respectively, in the first nine months. The Agricultural Bank of China continued to lead in net profit growth, expanding by 3.03%.
In terms of profitability sources, net interest income—one of the primary ways these banks earn—continued its downward trend, with narrower net interest margins across the board. Only Bank of Communications experienced an increase in net interest income, rising 1.46% year-over-year in the first three quarters. The other five banks all reported declines, with China Construction Bank and Bank of China experiencing drops of over 3%.
Regarding net interest margins, Bank of China maintained a steady rate at 1.26%, while margins for the other five banks declined slightly. Nonetheless, the rate of decline has slowed, with margins decreasing by no more than 0.04 percentage points from quarter to quarter, compared to as much as 0.17 percentage points during the first half of the year.
Overall asset quality is showing signs of stabilization. All but Postal Savings Bank of China saw a slight improvement in their non-performing loan ratios compared to the end of last year, with the Postal Savings Bank’s ratio increasing by 0.04 percentage points over nine months.
Provision coverage ratios—indicating the extent of reserves set aside for bad loans—present mixed results. ICBC, China Construction Bank, and Bank of Communications saw small increases, while the remaining three banks experienced varying decreases. The Postal Savings Bank’s coverage ratio declined to roughly 240% from 286% at the end of last year. Meanwhile, the Agricultural Bank of China maintained the highest ratio at 295.08% as of September 30th, down slightly from 299.61% at the beginning of the year.
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