Analysts warn that the downward trend in the profitability of the Asian giant’s banks will continue and responds to a debt crisis that caused cuts in mortgage rates.
Four of the oldest Chinese listed banks They reduced their margins in the third quarter due to a resurgence of turmoil in housing markets, which are facing a debt crisis and that led to cuts in mortgage rates.
The reduction in margins, a key indicator of profitability, comes at a time when State banks asked to reduce interest rates on existing mortgages this years to help reactivate the real estate sector, in an attempt to reinforce an economy in crisis.
Friday’s third-quarter earnings releases showed a decline in net rate margins at Industrial and Commercial Bank of China Ltd (ICBC), Agricultural Bank of China Ltd (AgBank) and Bank of Communications Co Ltd ( BoCom). The previous day, China Construction Bank Corp (CCB) also recorded a decline.
Analysts’ pessimistic projections
Analysts anticipate that this trend will continue. “We expect the sector’s intermediation margins to continue to shrink in 2024, as the effects of this year’s reductions in lending and mortgage interest rates are felt,” said Vivian Xue of the agency. Fitch rating.
However, he added that “further reductions in deposit rates and reserve requirement ratios could offset some of the pressure on margins.”
Analysts point out that one of the concerns for lenders could be exposure to the financing vehicles of local administrations, which have recently had increasing difficulties in servicing their debt.
Source: Ambito
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