Three of China's big banks beat profit estimates, warn of coronavirus impact

BEIJING/SHANGHAI (Reuters) - Three of China’s listed state-owned banks reported forecast-beating fourth-quarter results on Friday, as non-performing loan ratios held steady.

FILE PHOTO: A sanitation worker wearing a face mask walks past a branch of Industrial and Commercial Bank of China (ICBC) in Wuhan, the epicentre of the novel coronavirus outbreak, Hubei province, China February 25, 2020. REUTERS/Stringer

China’s largest banks have enjoyed some preferential policies from the government - such as state support to tackle bad loans. They often also lend to the less risky biggest state-owned firms, which has helped to buoy their profits despite the downturn in the economy.

The Industrial and Commercial Bank of China (ICBC) 601398.SS, 1398.HK reported a 4.2% rise in fourth-quarter net profit, beating expectations.

The Bank of Communications Co Ltd (BoCom) 601328.SS3328.HK and the Bank of China Ltd (BoC) 601988.SS, 3988.HK both followed suit with a 4.9% rise and 3.8% rise respectively, both also beating expectations.

Non-performing loans held steady at the three banks.

BoC reported a NPL ratio of 1.37% at the end of December, flat from the end of the previous quarter. Likewise, BoCom logged a 1.47% NPL ratio, flat over the same period. ICBC’s fell slightly from 1.44% to 1.43%.

Despite the strong results, BoC and ICBC warned that the coronavirus crisis will cause downward pressure on assets this year.

The outbreak of the virus in January, which left much of the country paralyzed for more than a month, has taken a toll on airlines, hotels and other businesses and left many of them struggling to survive.

ICBC President Gu Shu said the epidemic “will put some pressure on our asset quality.”

The economic fallout from the virus will have "impacts, to a certain extent, on the group’s asset quality and returns from certain businesses," the Bank of China Ltd (BoC) 601988.SS, 3988.HK said in its annual results, which were reported to the Hong Kong stock exchange.

“We expect there will be an increase in overdue loans in the first quarter and first half,” BOC Chief Risk Officer Liu Jiandong said.

ICBC warned of “increasing hotspots of turmoil and risk around the globe,” in its annual report, while BoCom said: “Risks in some areas may be aggravated, especially under the impact of the coronavirus outbreak.”

Net interest margins - the difference between what banks pay on deposits and earn on loans - varied among the three banks.

At BoCom, NIM rose slightly at the end of December from the end of the previous quarter, while at ICBC, it fell. BoC’s NIM stayed steady over the same period.

Reporting by Zhang Yan, Cheng Leng in Beijing, Engen Tham in Shanghai; Editing by Himani Sarkar/Edmund Blair/Jane Merriman