'Big Six' banks buoy economy through loans, advances

Listed banks from the A-share market are continuing to extend high-level support to key fields and weak links of the Chinese economy, experts said.

Such banks' credit structure shows they are making industries stronger, expanding financial inclusion, boosting green growth and promoting steady development of agriculture, industry observers said.

China's six largest State-owned commercial banks by assets — the "Big Six" — extended loans and advances worth about 95 trillion yuan ($13.06 trillion) to customers at the end of September, up by around 9.6 trillion yuan from the end of last year, according to their recently announced financial results for the third quarter.

Advances refer to money provided by lenders to clients to fulfill their short-term demands.

Industrial and Commercial Bank of China, the country's largest State-owned commercial lender, reported that its balance of infrastructure loans in the first three quarters went up by more than 640 billion yuan from the beginning of this year.

Over the same period, its balance of loans to the manufacturing sector increased by over 810 billion yuan, the balance of green lending grew by about 950 billion yuan, and the balance of inclusive loans rose by over 410 billion yuan.

Banks are expected to maintain high loan growth in the next one or two quarters, said Ma Tingting, an analyst at Guosheng Securities.

With the continuous implementation of policies to stabilize economic growth, China's banking sector will keep increasing lending to infrastructure projects and the manufacturing sector in the fourth quarter, through the implementation of the previously launched policy-based financial instruments, Ma said.

Liang Si, a researcher at the BOC Research Institute, said: "Financing demand of the real economy has picked up since the beginning of the third quarter. In particular, corporate demand for medium-and long-term credit has improved."

At the end of the third quarter, outstanding medium- and long-term loans to enterprises and public institutions grew 12.7 percent year-on-year to 83.86 trillion yuan, an acceleration of 0.7 percentage point from the first half, according to People's Bank of China, the central bank.

"In September, new medium- and long-term corporate loans accounted for 54.6 percent of new yuan loans, reaching the highest proportion since the beginning of this year. This will effectively assist the Chinese economy to achieve a steady pickup and accelerated recovery," Liang said.

Ye Yindan, another researcher at the BOC Research Institute, said, "China will maintain market liquidity at a reasonably ample level by taking possible measures like reserve requirement ratio cuts and open market operations to stabilize the size of banks' loan issuances and secure stepped-up funding for the real economy."

Apart from encouraging financial institutions to continue strengthening support for green and high-tech industries, China will also intensify policies to keep the operations of market entities stable. Actions like increasing the quota of inclusive loans for micro and small enterprises are likely to be taken to mitigate small businesses' capital flow pressure, Ye said.

Liu Zhiping, an analyst at Huaxi Securities, said credit allocation in the third quarter was strongly driven by policies, with a greater year-on-year increase in lending to key fields of the economy, such as the manufacturing sector, micro and small enterprises, and the green industry.

Listed Chinese banks posted continued growth in the first three quarters amid overall improvement in their asset quality despite the pressure they faced in terms of operating income. During the period, 42 listed banks from the A-share market recorded an 8 percent year-on-year increase in combined net profit, Liu said.

The Big Six reported that their total net profits attributable to shareholders of the bank exceeded 1 trillion yuan in the first three quarters.

Excluding Postal Savings Bank of China, the other five large banks' growth in net profit ranged from 5.47 percent to 6.52 percent while PSBC posted the highest net profit increase of 14.48 percent among the Big Six.

Given that listed banks from the A-share market made adequate allowance for impairment losses on loans, their full-year profit growth is likely to stay at around 8 percent, said Xiao Feifei, an analyst at CITIC Securities.

As the economy is still relatively weak, asset quality will remain key to banks' profit growth. Quality banks will register steady profit growth, thanks to accelerated disposal of nonperforming assets, better customer structure and strict risk management, said Ma with Guosheng Securities.