Chinese banks to see lower profits for 1st half of 2009

Discussion in 'Wall St. News' started by ASusilovic, Jul 29, 2009.

  1. Chinese listed banks, which have lent record high amounts in the first half, are likely to report lower profit growth in the period due to narrowing interest spreads and higher provisioning requirements, industry analysts said.

    "We are expecting a 7 to 8 percent year-on-year profit fall among the 14 listed banks in the first half-year," said Wang Liwen, banking analyst with Shanghai-based Guotai Junan Securities Co, citing stretched interest spreads as the major reason.

    In 2008, the net interest rate spread for banks ranged from 2.45 percentage points to 3.62 percentage points, with the average figure hovering around 3 percentage points. This year, as the government cut interest rates several times to spur economic growth amid the global financial crisis, the net interest rate spread is expected to be lower, at around 2.36 percentage points.

    "A drop of 0.7 percentage points in the average net interest rate spread could mean some 7-billion-yuan decrease in the interest yield for each trillion yuan of new loans," said Wang.