Expert Analysis of 16 Chinese Banks
The report provides an overall analysis of the 16 Chinese banks listed on the Chinese A-stock market, as of the end of December 2014. The research includes information on financial positions, loan quality and investment characteristics. Notably, the report shows that the overall profitability of the Chinese banking industry slowly fell last year. This was due to a decline in economic growth, interest rate marketization and competition with internet banking.
Key findings on the financial position of these banks for 2014 include:
- Profitability: The listed Chinese banks’ net profits, attributable to the parent company, amounts to 1,247.38 billion yuan in total. Earnings growth dropped to 7.68% from 12.78% in 2013, with nine banks reporting growth of less than 10%.
- Assets: Total assets of the banks covered in the report reached CNY 105.76 trillion, an increase of 10.63 trillion yuan from the end of 2013. This was due to the growth of credit assets and securities investment. Conversely, interbanking assets contracted during the report period.
- Non-performing loans: The balance and ratio of non-performing loans both increased. By the end of 2014, the total amount of the banks’ non-performing loans was more than CNY 668.3 billion, representing an increase of nearly 40%. All 16 banks had an increase in non-performing loans. The report notes that the greatest concentration of these loans is in the Yangtze River Delta. There was a large increase in non-performing loan in the Western China region at the end of 2014, which needs more attention.
“From the analysis of their securities investment structure we can see that the banks selected different investments based on their unique risk preferences, capital advantages, and revenue strategies,” said Elsa Yuan, editor at Wolters Kluwer China. “The large state-owned banks tend to hold bond investments, more than half of which are hold-to-maturity investments. The national joint-stock commercial banks and regional banks had wider selections of investments, and had fast-growing investments in trust funds assets and asset management products.”
“With the continuous development and improvement of technology and deepening of financial innovation, traditional banking channels will be weakened,” Spark Wang, senior regulatory intelligence expert at Wolters Kluwer Financial Services added. “In 2015, the newly opened private banks, such as the Shanghai Hua Rui Bank, will be dedicated to web based financial services. The competition between such new types of financial institutions and traditional banks will occupy the latter’s market shares of the deposit and lending business.”
Wang recently summarized key regulatory changes in China. The full Chinese summary of this is available for download, to gain deeper insights to the regulatory changes and their impacts.
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