China's ICBC posts decade-low profit growth; bankers pledge more help on debt

SHANGHAI/BEIJING: The world's largest lender, Industrial and Commercial Bank of China (ICBC) , reported its slowest rate of annual profit growth in more than a decade on Thursday, and China's bankers pledged to do more to help borrowers struggling with debt.

ICBC's results came after three other leading Chinese banks posted modest profit growth for last year, as they battle the lowest net interest margins since at least 2011 amid a slowing economy.

ICBC's 2016 net profit - of 278.25 billion yuan ($40.39 billion) - rose just 0.4 percent, a far cry from the 66 percent jump in annual profit it reported a decade ago.

China's main banks are preparing to roll out measures this year to ease the burden for struggling borrowers, and help reduce non-performing loans (NPLs), which surged to a decade-high for China's banks last year as the economy grew at its slowest pace in over a quarter century.

"This year, we plan to use 65 billion yuan in provisioning to resolve nearly 200 billion yuan in NPLs," ICBC Chairman Yi Huiman told a press conference on the bank's results.

ICBC plans 300 billion yuan of debt-for-equity swaps this year, he added, deals which ease the burden for struggling borrowers and help commercial lenders cut their NPL ratios.

The bank's chief risk officer said ICBC had a 2 billion yuan ($290.36 million) loan exposure to Huishan Dairy, which is battling to appease creditors after its share price slumped 85 percent in one day last week over financing concerns.

Second-ranked China Construction Bank (CCB) plans more than 300 billion yuan of debt-for-equity swaps in the first quarter alone, its president, Wang Zuji, told reporters on Thursday.

Earlier this week, Agricultural Bank of China (AgBank)  said it was in talks to undertake more than 20 debt-to-equity deals after signing agreements with eight companies worth around 70 billion yuan.

MARGIN SQUEEZE

At ICBC, net interest margins (NIM) - the difference between interest paid and earned, and a key gauge of bank profitability - fell to 2.16 percent at end-December from 2.18 percent at end-September, after Beijing's six successive benchmark interest rate cuts in 2014-15.

CCB, AgBank and Bank of Communications (BoCom) have all this week reported their lowest NIM since at least 2011. But CCB expects its NIM to stabilise this year, Chief Financial Officer Xu Yiming told the news briefing.

Write-offs at ICBC jumped by nearly a quarter last year to 74.14 billion yuan, helping stem the flow of NPLs. The bank's NPL ratio was flat at 1.62 percent at end-December, and Yi said he expects asset quality to improve this year.

ICBC has shrunk its loan-loss allowance ratio - a measure of cash set aside as a percentage of reported NPLs - to at least a 5-year low of 136.65 percent as of end-2016. That's below a regulatory threshold of 150 percent, as rising bad debt write-offs erode capital buffers.

"In 2017, the global economy will maintain the overall trend of downturn, weakness, differentiation and turbulence," ICBC said in its annual report, citing increasing financial risks and the tightening of capital constraints as major obstacles this year.