Chinese banks face first H1 profit drop in a decade

The regulator has urged banks to recognise bad loans and hike buffers.

Some of China’s largest banks are set to record their first drop in first-half profits since the global financial crisis, driven by an uptick in bad debt and loan loss provisions due to the pandemic, reports Reuters.

Chinese commercial banks overall posted a 9.4% fall in first half net profit, whilst the six biggest posted a 12% profit fall from a year ago, according to China Banking and Insurance Regulatory Commission (CBIRC) data.

State banks including Industrial and Commercial Bank of China, China Construction Bank, and Bank of China will start their earnings season on 28 August.

The banking regulator has asked some state lenders to fully recognise bad loans on balance sheets and increase buffers for covering souring debt in H1, which will drag down profits, sources said.

Some smaller banks are also being urged to adopt measures such as slashing bankers’ salaries to shore up their balance sheets and face the “tough days”.

Here’s more from Reuters.