Chinese lenders could post flat or even falling profits in 2020 despite earnings growth in the first quarter as the coronavirus outbreak brings difficulties to the economy, the country's central bank said in an article (link in Chinese) on Sunday.

For the first quarter of 2020, China's commercial banks realized net profits of 600.1 billion yuan (84.2 billion U.S. dollars), up five percent year on year, mainly due to the expansion of banks' assets and lower management costs, according to an article by the research bureau of the People's Bank of China (PBOC).

The possibility could not be ruled out that banks could log zero or even negative profit growth within 2020, due to mounting bad loans and a fast draining of cash buffers, as the difficulties in the real economy spill over into the financial area, the PBOC warned in the article.

Since China's financial cycle and economic cycle are not in the same track, there is a certain lag in the disclosure of non-performing loans, according to the article. In addition, Chinese banks has deferred principal and interest repayments for enterprises due to the epidemic, which puts more pressure on the banks to dispose of non-performing loan in the long term.

China's banks need to further support the real economy, which faces various challenges due to the coronavirus outbreak, in particular small and micro enterprises, as there is room for banks to surrender part of their healthy profits, the article said. 

To cushion the economy, small and midium-sized firms can delay paying loans and interest by a nine more months, through March 2021 and lending to small- and medium-sized enterprises by big commercial banks should grow more than 40 percent, Premier Li Keqiang said on Friday.

(With input from Reuters)