* ICBC Q4 net profit 44.43 bln yuan vs 42.6 bln street view
* BOC Q4 net profit 27.88 bln yuan vs 25.25 view
* ICBC NPL ratio 0.94 at end-2011 vs 0.91 at end-September
* Most bad loans linked to real estate, local governments
By Kelvin Soh and Lawrence White
HONG KONG, March 29 Industrial and Commercial
Bank of China and Bank of China reported
increases in non-performing loans on Thursday, raising fears of
worsening credit quality as China's economy slows.
The non-performing loans (NPL) data was released along with
stronger-than-expected fourth-quarter earnings from both banks,
and company chiefs sought to play down their significance.
"A single cough doesn't mean you have a cold," said ICBC
chairman Jiang Jianqing. "You need to look at the broader NPL
trends, and ICBC has been able to lower its NPL numbers for 12
But both banks saw NPL ratios creep up following a credit
clampdown that has led to rising bad loans and falling fee and
commission income across most of China's major banks.
China Construction Bank, the world's second larget lender by
market value, was particularly hard hit, with total
non-performing loans rising almost 10 percent in
October-December according to results released on March 26.
"Chinese banks are a proxy to growth in China, and with data
looking like they could slow further into the second quarter, it
doesn't look like a good time to buy into the sector right now
despite some really attractive valuations," said Alan Lam,
Julius Baer's Greater China equity analyst.
ICBC said its non-performing loan ratio at the end of 2011
rose to 0.94 percent from 0.91 percent at the end of September,
while BOC's inched up one basis point to 1 percent.
Agricultural Bank of China also reported rising
non-performing loans and provisions against loans likely to go
Most of the bad loans are expected to be linked to local
governments and the real estate sector. These were the major
beneficiaries when Beijing ordered banks to lend freely during
the 2009 financial crisis to keep the economy humming.
Recent data from China has raised fresh concerns about the
pace of the economic slowdown after Premier Wen Jiabao earlier
this month forecast a 7.5 percent GDP growth in 2012 for the
world's second-biggest economy, an eight-year low.
The HSBC flash purchasing managers index, the earliest
indicator of China's industrial sector, showed last week that
factory activity shrank for a fifth consecutive month in March.
In a rare occurrence, China's industrial firms saw profits
drop 5.2 percent in the first two months of 2012, mainly in
petrochemicals, metals and auto firms, according to the National
Bureau of Statistics. The last period that China reported
nationwide industrial profit fall was in the first eight months
The lackluster data has pushed bank shares broadly lower for
most of this week. For example, China Construction Bank is
currently hovering around 12-week lows.
The increase in bad loans among China's leading banks
threatens to overshadow their otherwise strong performances,
generally beating analysts estimates of what both their
quarterly and annual earnings would be.
ICBC, in which U.S. investment bank Goldman Sachs
owns a 2.5 percent stake, reported net profit of 44.43 billion
yuan ($7.05 billion) in the fourth quarter of last year, Reuters
calculations from company figures showed.
This was higher than the 37.9 billion yuan it recorded in
the same period a year ago and compare with a forecast of 42.6
billion yuan, according to a poll of 34 analysts surveyed by
Thomson Reuters I/B/E/S.
Bank of China recorded a net profit increase of 11 percent
to 27.88 billion billion yuan for the fourth quarter, according
to Reuters calculations. This was higher than the 25.2 billion
yuan a year earlier, and beat expectations for 25.25 billion
ICBC said it made a net profit of 208.3 billion yuan in
2011, better than expectations for 206.5 billion yuan, according
to the same survey.
Bank of China similiarly beat analysts' consensus for the
year as well as the quarter, posting a net profit of 124.18
billion yuan for 2011, higher than the 104.42 billion yuan it
recorded a year earlier. This was better than expectations for
121.6 billion yuan, according to a poll of 31 analysts polled by
Thomson Reuters I/B/E/S.
Bank of Communications (BoComm) is the star in
this year's earnings round, with a 30 percent rise in quarterly
earnings and its share price rising 0.7 percent Thursday. That
compared with disappointment for China Construction Bank and
Aggricultural Bank. The latter is currently trading at a
12-month forward earnings multiple that is a 33 percent discount
to its historical median, while CCB is trading at a 47 percent
discount, according to StarMine.