Chinese banks report higher first-half profits

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China's commercial banks reported higher first-half profits from a year earlier, and the overall level of non-performing loans (NPLs) in June did not increase from March, the country's banking regulator said on Monday.

Total profits for commercial lenders reached 970.3 billion yuan (145.5 billion US dollars) for the six months, up 7.92 percent from the first half of 2016, according to data from the China Banking Regulatory Commission (CBRC).

Logo of the China Banking Regulatory Commission (CBRC) /VCG Photo

While profits increased, profitability — measured by return on assets and return on equity — slightly decreased from a year earlier, the CBRC said.

The NPL ratio for commercial lenders stood at 1.74 percent at the end of June, unchanged from the end of the first quarter, according to the regulator.

Chinese lenders' NPL ratio declined for the first time since 2012 to the current level in the last quarter of 2016, an encouraging sign for the economy plagued by piling debt.

Commercial bank NPLs totaled 1.64 trillion yuan, up from 1.58 trillion yuan at end-March.

According to the CBRC, the percentage of "special mention loans" — ones where borrowers are experiencing difficulties — eased slightly to 3.64 percent by end-June from 3.77 percent at end-March.

Loan loss reserves — accounting entries banks make to cover estimated losses on loans due to defaults and nonpayment — increased to 2.9 trillion yuan (around 430 billion US dollars), up by 74.7 billion yuan from last quarter, while the provision coverage was at 177.2 percent, down 1.58 percentage points from the end of March.

Commercial banks are required to maintain provisions of at least 150 percent of non-performing loans.

VCG Photo

China's banking regulator has pressed commercial lenders this year to clean up their operations and reduce risk, as a surge in total lending causes the country to pay increasing attention to the health of its financial system.

The People's Bank of China, in its second-quarter monetary policy report published on Friday, said the central bank will continue to improve its quarterly macro-prudential assessment of the operations of financial institutions.

At the National Financial Work Conference, a once-in-five-years government gathering held last month, President Xi Jinping said that financial security is a vital part of national security.

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Source(s): Reuters ,Xinhua News Agency