March 29, 2012 / 10:00 AM / 8 years ago

UPDATE 1-China's ICBC says profit rises, bad loans increase

* Q4 net profit 44.43 bln yuan vs 42.6 bln street view

* 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

HONG KONG, March 29 (Reuters) - Industrial and Commercial Bank of China reported an increase in non-performing loans on Thursday alongside stronger-than-expected fourth-quarter earnings, pointing to possible worsening credit quality as China’s economy slows.

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.

A credit clampdown has led to rising bad loans and falling fee and commission income across most of China’s major banks.

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. Loan-loss provisions rose to 2.5 percent of the bank’s overall lending from 2.46 percent at the end of 2010.

China’s Construction Bank and Agricultural Bank also reported rising non-performing loans and provisions against loans likely to go bad.

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.

ICBC’s profits for the quarter were higher than the 37.9 billion yuan it recorded 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.

The bank 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.

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 of 2009.

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.

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