Banks urged to transform amid slow net profit growth

The net profit growth of China's publicly listed banks slowed further in 2012 as a result of falling interest income, putting pressure on banks to be more innovative and to seek new areas of growth, Ernst & Young said at a press conference Tuesday.

The country's 17 listed banks saw a slowdown in profit growth last year with net profit growing at 17 percent, down 12 percentage points from 2011, the accounting firm wrote in a report based on the annual results from the banks.

The growth rate of interest income - a major part of banks' revenues - slowed significantly to 16 percent last year, down from 25 percent in 2011 and 28 percent in 2010, according to Ernst & Young.

The trend continued in the first quarter of this year, when interest income grew by only 9 percent, down from 21 percent in the same period of last year, Geoffrey Choi, financial services partner at Ernst & Young, said at the press conference.

Meanwhile, intermediary fees and commissions grew by an average of 24 percent for the listed banks in the first quarter of this year, up from 17 percent a year ago, Choi said.

However, tighter new regulations on wealth management products, which contribute to banks' sales commissions, could affect the revenues from banks' intermediary business to some extent, Choi said.

"Banks should seize the opportunity to upgrade systems, improve customer experience and use new technology to fuel financial innovation, such as mobile payment and e-banking," he said.

Many banks have already started to transform, focusing on growth models that are more vigorous than others, Jin Lin, a banking analyst at Orient Securities, told the Global Times Tuesday.

For instance, wealth management products and services allow banks to generate more commissions and income from fees, and China Merchants Bank has a reputation for its strength in this area, he said.