China's large commercial banks are reporting good performances for 2017. The large listed banks that have so far disclosed their fiscal results showed overall net profit increases, while their bad loan ratios saw year-on-year declines. But the situation was a bit different for smaller commercial city banks that didn't do so well. Chen Tong reports.

The big five state-owned banks continued their stable showings last year. ICBC earned the most in 2017, with net profits hitting 286 billion yuan, but the bank's year-on-year increase was the slowest among the five. Agricultural Bank of China did the best year-on-year, with a profits increase of 4.9 percent, followed by Bank of China and China Construction Bank. Among the best performers were China Merchants Bank and Everbright Bank, which also saw their bad loan ratios fall. The news was different for local banks, however.

CAI JUNYI, CHIEF ANALYST SHANGHAI SECURITIES "We've seen large banks extend their stable performances in 2017, but stricter financial regulations meant a divergence in performance among city-level banks. Aside from the earnings issue, however, the asset quality of the banks is improving. With the exception of China Minsheng Bank, overall bad loan ratios are declining. Banks are doing well in their preparation against financial risks."

It was a mixed picture for smaller banks, however. Some city commercial banks actually saw earnings decline in 2017. Net profits for Bank of Tianjin and Bank of Qingdao, for example, both dropped by ten percent from the previous year, and some other city commercial banks including Bank of Zhengzhou and Bank of Chongqing saw slower profit increases. Experts say that the divergent performances stem from stricter scrutiny of asset management by the regulator. The Chinese government has been directing the commercial banks away from shadow banking and back to what should be their real business, and that has caused headaches for smaller banks with weaker asset qualities.

ZHAO YARUI, SENIOR RESEARCHER BANK OF COMMUNICATIONS "The tough scrutiny of commercial banks actually started at the end of 2016 and we've seen additional measures taken in 2017. The draft of new regulations has been out for a while, however, so the banks have had time to prepare for them and should not have much additional impact. It will even benefit their operations long-term because the regulations help banks curb financial risks."

China's central reform commission has just approved the new guidelines for asset management, and the final provisions are expected to be launched soon. China now has around 15 trillion yuan worth of asset management products and a quarter of those are being handled by banks.