Top banks see slowdown in profit growth

As of Monday, China's top five State-owned commercial banks had all posted their annual reports for 2013, showing a combined profit of 862.7 billion yuan ($139 billion) but with slower growth and rising bad debts.

The aggregate 2013 profits of the top five - Industrial and Commercial Bank of China (ICBC), China -Construction Bank (CCB), Agricultural Bank of -China (ABC), Bank of China (BOC), and Bank of Communications - rose by 11.4 percent year-on-year and accounted for 62.5 percent of the profits in China's banking sector.

ICBC, China's largest bank by market value, was still the country's most profitable bank in 2013 with 263 billion yuan of net profit, even more than the combined 250 billion yuan net profit earned by China's top three State-owned oil companies last year.

However, profit growth for the top banks weakened in 2013. Only BOC saw faster profit growth last year, with the figure rising to 12.36 percent year-on-year from 11.51 percent in 2012. The other four banks witnessed a slowdown in profit growth.

"Corporate defaults and rising bad debts against the backdrop of the cooling economy eroded the banks' profit margins," Zhang Taowei, a finance professor at Tsinghua University, told the Global Times on Monday.

The rapid development of Internet finance amid ongoing efforts to liberalize interest rates also hit banks' ability to gain deposits, which increased their financing costs, Zhang said.

Tightened regulation of off-balance sheet shadow banking activities has also curbed bank revenues, Zhang noted.

ICBC saw profit growth of 10.17 percent year-on-year, down from 14.53 percent in 2012.

Bank of Communications even saw its profit growth rate halved last year compared with a year earlier.

Online wealth management products launched by Internet giants such as Alibaba Group and Tencent Holdings have increased the competition for deposits.

Alibaba's Yu'ebao, a money market fund that offers a higher yield than traditional bank deposits, has gained over 81 million users and assets that reportedly have reached 500 billion yuan in the nine months since it was launched in June 2013.

Meanwhile, the top five banks wrote off a total of 59 billion yuan in bad assets in 2013, the highest in a decade, and more than double the amount written off in 2012.

The banks posted total non performing loans (NPLs) of 46.83 billion yuan in 2013, while the NPLs in 2012 were only 10.95 billion yuan.

"We will pay more attention to the asset quality of local government financing vehicles, sectors with overcapacity issues and the property sector this year," BOC President Chen Si-qing said at a media briefing held on Wednesday.

Outstanding bank deposits at ICBC and CCB decreased in 2013 by 90.5 billion yuan and 78.4 billion yuan, respectively, year-on-year.

The deterioration of asset quality will continue to weigh on banking profits this year, Yu Wali, a banking analyst at China Minzu Securities, told the Global Times on Monday.

Many of the debts of local government financing vehicles (LGFVs) are due this year, but local government revenues have fallen as a result of a decline in prices of land, so LGFVs are facing greater pressure in repaying their loans, according to analysts.

Some smaller joint stock banks - including Shanghai Pudong Development Bank, Ping An Bank, and China Minsheng Banking Corp - also reported a slowdown in profit growth in 2013 compared with 2012, according to their financial reports.