HONG KONG China Construction Bank Corp (CCB) (0939.HK), the country's No.2 lender, posted a third-quarter net profit of 12 percent, beating estimates, as interest income grew after the central bank allowed lenders to set their own loan rates.
Net profit rose to 51.9 billion yuan ($8.31 billion) in July-September from 46.2 billion yuan a year ago, CCB said on Sunday. That compares with the average estimate of 51.59 billion yuan in a Reuters poll of 12 analysts.
That makes CCB (601939.SS) the third of the so-called "Big Four" Chinese banks to report better-than-expected third-quarter earnings, although the lender's net profit growth lags Agricultural Bank of China Ltd's (1288.HK) 16 percent gain and Bank of China Ltd's (3988.HK) 17 percent increase.
Analysts had expected the profitability of banks to be hit by two central bank interest rate cuts since June. But their earnings had been supported by China's landmark decision to let lenders set their own loan rates.
The central bank in June allowed banks to set loan rates up to 20 percent higher than its benchmark rate, and in July raised the ceiling to 30 percent.
CCB's net interest income, the amount a bank charges for loans minus what it pays depositors, rose 18 percent in the third quarter from a year earlier to 91.3 billion yuan.
Net interest margin, which measures loan profitability, widened to 2.74 percent at the end of September from 2.71 percent at the end of June.
"Generally, we will probably continue to see strong margin numbers this year among the big banks," said Sheng Nan, an analyst at CCB International in Hong Kong. "Loan pricing remains fairly strong, and the big banks still have sufficient liquidity to lend."
FEES, COMMISSION INCOME
Weighing on profits was a sharp slowdown in fees and commission income, which includes earnings from wealth management and credit cards, following a regulatory crackdown on the kind of charges that banks can impose.
Fees and commission income rose 1.6 percent to 69.9 billion yuan in the third quarter. That compares with a 40 percent jump a year earlier.
Concerns about bad debts have also weighed on the outlook for the country's banks. In China's entrepreneurial hub of Wenzhou, the city's overall non-performing loan ratio had doubled to about 3 percent, according to official Chinese media.
Such worries have hit the stock market performance of banks this year, with CCB underperforming the benchmark Hang Seng Index's 15 percent rise in Hong Kong. The stock fell 1 percent on Friday to close at HK$5.74.
CCB said it set aside 8.4 billion yuan as provisions against bad debt in the third quarter, up from 6.9 billion yuan last year.
The bank had a non-performing loan ratio of 1 percent at the end of September, unchanged from the end of June.
Its overall bad loan balance rose to 72.9 billion yuan from 70.42 billion yuan at the end of the first half.
New loans increased by 769.6 billion yuan in the first nine months, bringing its outstanding loan figure to 7.3 trillion yuan, CCB said. ($1 = 6.2489 Chinese yuan)
(Reporting by Kelvin Soh; Editing by Ryan Woo)