China's biggest five banks have released their quarterly earnings showing slow profit growth, but better bad debts management was also seen in some of them.
Financial statements from China's five major banks, Bank of China, the Industrial and Commercial Bank of China (ICBC), Bank of Communications, Agricultural Bank of China (ABC) and China Construction Bank have all shown slower profit growth.
Net profits of ICBC, Bank of Communications and Bank of China plunged by over 70% compared to the previous quarter.
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Their net interest margins (NIMs) - the difference between interests paid and earned - also slipped. NIMs, a key gauge of bank profitability, continued to fall across the banks. ICBC, the world's largest bank, reported on Friday a NIM of 2.12% at the end of March, compared to 2.16% at the end of December.
NIM compression was also felt keenly by the Bank of Communications, which saw its NIM drop to 1.57% at the end of March, its lowest since 2011. NIMs at the Bank of China, ABC and China Construction Bank have also shown a similar trend, at their lowest levels, since 2011-2012.
However, despite the fact that their profit growth has slowed down, they managed to keep their bad loans from rising, with ABC's bad loan rate edging down 0.04% and ICBC's down 0.03% compared to the previous quarter. The Bank of China also reported a slight fall.
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Analysts attributed the bad loan management performance to the country's debt-for-equity swap policies and enhanced government regulation.
China issued a detailed plan last October, allowing banks to exchange bad debt for stocks in companies concerned, which will help free up bank balance sheets.
The country has also been putting efforts in deleveraging, one of the measures for supply-side structural reforms, putting further control in the expansion of bad loans in the banking sector.
