Chinese banks face profitability pressure: Moody's

BEIJING — Chinese listed banks were confronted with profitability pressure from the country's slowing economic growth, despite the absence of any significant deterioration in reported asset performance, said Moody's Investors Service.

"At the same time, the banks' capitalization and liquidity positions remained stable overall, but weakened among the smaller entities due to their faster rate of asset growth," the global rating agency said in a latest report.

The 11 State-owned and joint-stock commercial banks including the Industrial and Commercial Bank of China reported average loan growth of 12 percent in 2016, faster than the 10-percent in 2015, while the national joint-stock commercial banks continued to grow their loans faster than the major State-owned peers.

The reported asset performance for these 11 banks remained largely stable last year, it said.

"The banks' stable reported asset performance came despite our view that current asset risks remain biased to the downside because of rising corporate leverage and strong mortgage growth amid rapid house price appreciation," Moody's said.

Profitability remained under pressure throughout the year, as reflected in a continued decline in the banks' return on average assets (RoA), due to factors including a further narrowing in net interest margins, with the RoA for the 11 banks dropping to 1.05 percent in 2016 from 1.15 percent a year ago, it said.

The Chinese economy expanded 6.7 percent in 2016, its slowest growth in a quarter of a century.