A-share market listed lenders post mixed first-quarter earnings

Chinese lenders listed on the A-share market posted divergent earnings performance during the first quarter of this year, according to published data.

Out of the 38 A-share listed banks, 11 achieved double-digit growth in net profit attributable to shareholders of the bank, while 10 recorded less than 3 percent growth in net profit growth or even a decline.

Among the nine A-share listed national joint stock commercial lenders, Ping An Bank Co Ltd posted 18.5 percent year-on-year growth in net profit attributable to shareholders of the bank, followed by China Merchants Bank Co Ltd (15.18 percent) and Industrial Bank Co Ltd (13.67 percent), China Minsheng Banking Corp Ltd (CMBC), on the contrary, reported an 11.43 percent decline in net profit over the same period a year ago.

Compared with their peers, banks that had a larger number of corporate clients specializing in high-energy consumption and highly-polluting industries and industries with overcapacity, or offered loans to a larger number of high-risk private companies or State-owned enterprises in less developed areas, faced higher growth pressure during the period. In addition, for those banks where marketization level was low, corporate governance was unsound and strategies were unclear, the gap between themselves and leading banks kept increasing, analysts said.

"While we saw a stable performance with good momentum for growth in terms of overall operations of A-share listed banks, their operating incomes diverged clearly in the first quarter," Wang Yifeng, an analyst with Everbright Securities, said in a recent research report. "Looking ahead, profit growth of high-quality banks will hopefully accelerate further, and we will see the strong get stronger."

For example, China Merchants Bank, Ping An Bank and Industrial Bank achieved double-digit growth in operating income in the first quarter, thanks to their rapid intermediary business income growth in areas such as wealth management, whereas CMBC, Shanghai Pudong Development Bank Co Ltd, and China Zheshang Bank Co Ltd posted decline in operating income.

Wang urged investors to increase allocation of assets to quality joint stock commercial lenders that have strong certainties in performance, especially those whose features lie in wealth management, asset-light business and financial technologies. Besides, leading city commercial banks in Shanghai municipality, Jiangsu and Zhejiang provinces are also good investment targets, as a stronger post-COVID-19 economic recovery is expected in these areas, compared with other regions.

"Small and medium-sized banks with indistinct features have been badly affected by COVID-19, which accelerated divergence of the banking industry. Besides, banks with strong risk management and mitigation capabilities will achieve better performance amid the economic downturn. Looking ahead, the divergence will intensify," said Dong Ximiao, chief researcher at Merchants Union Consumer Finance Co.

Xiao Feifei, chief banking analyst with CITIC Securities, said the profitability of listed banks is improving steadily, which shows a continuous recovery of macroeconomic prosperity.

"Banks whose operating income grew by 20 percent year-on-year in the first quarter coexisted with those whose operating income fell by 20 percent. In the future, banks' client base, business structure and speed of problematic asset clearance will lead to a continued divergence in the banking industry," Xiao said.