HONG KONG, March 26 (Reuters) - Bank of China Ltd (BOC) and Agricultural Bank of China Ltd (AgBank) reported their worst annual earnings growth since going public, hit by central bank interest rate cuts in a slowing economy.
Like rival China Construction Bank Corp, which reported earnings on Sunday, the two banks have faced pressure on their net interest margins following two rounds of interest rate reductions in 2012 to stimulate an economy that grew the slowest in over a decade.
AgBank said its net profit rose 19 percent in 2012 to 145.1 billion yuan ($23.36 billion), lagging expectations for a 147.6 billion yuan profit, according to a Thomson Reuters I/B/E/S survey of 27 analysts.
BOC’s net profit grew 12.2 percent to 139.4 billion yuan, exceeding expectations for 132.5 billion yuan, a Thomson Reuters I/B/E/S survey of 30 analysts shows.
AgBank said its net interest margin fell to 2.81 percent as of the end of 2012 compared with 2.82 percent in the third quarter. Bank of China said its net interest margin was 2.15 percent at the end of last year compared with 2.12 percent in July-September.
A cooling Chinese economy has raised expectations that the country’s banks may see a spike in bad loans, largely stemming from a 4 trillion yuan stimulus package in 2009 and over-investment in its frothy real estate and infrastructure sectors.
AgBank has 178.8 billion yuan of exposure to railway ministry loans and bonds, Chief Financial Officer Zhang Keqiu said at a press conference in Hong Kong on Tuesday.
BOC and AgBank’s non-performing loan (NPL) ratios remained largely unchanged, with BOC saying its NPL ratio clocked in at 0.95 percent at end-2012 compared with 0.94 percent at end-September.
AgBank said its NPL ratio was 1.33 percent, down from 1.34 percent at the end of the third quarter. ($1 = 6.2107 Chinese yuan) (Reporting by Kelvin Soh; Editing by Ryan Woo)