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China banks report slower profit growth in 2012

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(Globalpost/GlobalPost)

Two of China's biggest banks recorded weaker profit growth last year, according to annual reports released Tuesday, as a slowdown in the world's second largest economy hit loan demand.

Bank of China (BOC) said its net profit rose 12.2 percent from a year earlier -- the slowest pace since 2006 -- to 139.4 billion yuan ($22.4 billion) in 2012, according to a statement.

The bank's net interest income -- its main source of profit -- climbed 12.7 percent on-year to 257.0 billion yuan. Net interest income measures interest earned minus interest paid.

Separately, the Agricultural Bank of China (ABC) said it recorded a 19.0 percent year-on-year increase in net profits to 145.1 billion yuan last year.

The agricultural lender's profit growth was the slowest since 2010, when it listed in Hong Kong, according to previous filings.

ABC's net interest income gained 11.3 percent year-on-year to 341.9 billion yuan in 2012, the bank said in a statement.

The banks blamed China's economic downtrend for affecting growth of loans. China's interest rate liberalisation is another cause of slowing profit growth in the banking sector, analysts say.

China's economy expanded 7.8 percent in 2012, its slowest pace for 13 years, in the face of weakness at home and in key overseas markets.

China's central bank last year expanded the range that banks' deposit and lending rates can float around benchmark levels, a move which could result in narrower net interest margins for banks.

Shares of BOC closed down 0.28 percent to HK$3.55 ($0.46) in Hong Kong trading on Tuesday, while ABC lost 0.79 percent to HK$3.78.

In Shanghai, where both banks are also listed, BOC was unchanged at 2.99 yuan while ABC dropped 1.38 percent to 2.86 yuan.

Another major bank, China Construction Bank, said over the weekend that its net profits rose 14.1 percent last year from 2011.

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http://www.globalpost.com/dispatch/news/afp/130326/china-banks-report-slower-profit-growth-2012