Major lenders beat expectations with strong jump in earnings

Galaxy Securities Co Ltd forecast an average 9.6 percent increase in lenders' earnings in the first quarter. The investment bank was more optimistic than Guotai Junan Securities Co Ltd, which forecast 8.9 percent, and Shenyin Wanguo Securities Co Ltd, which forecast 7.23 percent.

The gloomy market sentiment over Chinese banks stems from worries that their heavy reliance on net interest income may hurt profitability as regulators push harder for interest rate liberalization and funding channel diversification.

"Banks are set to play a smaller role in the long term as the country diversifies away from its reliance on bank loans," said Khiem Do, Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management Ltd, in an earlier interview.

Heads of the "Big Five" banks reached a consensus at a meeting earlier this year that the banking sector's high growth will be unsustainable as net interest margins shrink due to fiercer competition, Caixin Online said in a report in January.

A property market rebound in the first quarter helped the banking sector. The central bank said this week that Chinese financial institutions extended a total of 710.3 billion yuan in mortgage loans in the first quarter, more than double the figure in the previous quarter.

Zhang Dawei, research director at real estate brokerage company Centaline Group, said that regulatory loosening last year resulted in a jump in mortgage loans in the first quarter.

"This was especially the case in March, when homebuyers rushed to make deals in the face of looming tightening measures," said Zhang.

Consumer loans also surged in the first quarter. The "Big Five" commercial banks' credit card loans, for example, jumped 51.04 percent year-on-year to 878.3 billion yuan.