China’s biggest banks, including Industrial & Commercial Bank of China Ltd., have reported slowing profit growth and eroding margins after being enlisted by Beijing to help stave off a deeper collapse in the world’s second-largest economy.

ICBC, the world’s largest bank by assets, reported net profit up 4.9%, the slowest in two years, in the first half of the year, while Bank of China’s profits ltd. and China Construction Bank Corp rose 6.3% and 5.4% annually. – over a year, respectively. ICBC’s net interest margin slipped to 2.03% from 2.12% and CCB’s narrowed to 2.09%, while BOC’s was unchanged at 1.76% from to the previous year.

The $52 trillion banking sector faces an increasingly difficult year, with its major lenders slashing loan rates while bad debts pile up amid a real estate crisis. Authorities in Beijing expect them to contribute to economic growth at the expense of incomes as they face falling property prices, stalled developments and a nationwide boycott of low-cost mortgages. the consumption.

“The bank will further play its leading role as a major bank to implement, in a high quality manner, the central government’s set of policies to maintain stable economic growth and be a good leader in credit provision. countercyclical,” ICBC said. in his report.

Key figures 1H:

1. ICBC: Net profit of 171.5 billion yuan against 163.5 billion yuan
2. CCB: Net income 161.6 billion yuan against 153.3 billion yuan
3. BOC: Net profit 119.9 billion yuan vs. 112.8 billion yuan

The banking sector’s outstanding non-performing loans hit a record high of 2.95 trillion yuan in June. Lenders’ exposure to real estate is greater than that of any other industry, with 39 trillion yuan in outstanding mortgages and 12 trillion yuan in loans to developers, according to official data. In particular, Bank of China’s exposure to mainland real estate is higher than that of its peers, at around 38% of total lending.

ICBC reported that its ratio of non-performing loans to real estate fell from 4.79% at the end of 2021 to 5.47% in the first half. Last year.

Bank of Communications Co. last week reported a 79% increase in non-performing home loans in the first half, while China Merchants Bank Co. saw its non-performing home loans double.

The pressure of being told to lend more when borrowing demand is weak has also forced some big banks to employ unusual practices to shore up lending volumes.

China’s central bank lowered its benchmark interest rate this month to support growth. A Bloomberg poll of economists predicts China’s annual economic growth of 3.5%, well below the official target of 5.5%, hurt by Covid lockdowns, lukewarm domestic demand and unrest in the real estate sector.

Banks will face even greater pressure on margins in the second half of the year as the impact of lower benchmark rates is felt, said Grace Wu, head of Greater China bank ratings. at Fitch Ratings. Banks are facing capital constraints, as their core capital positions have deteriorated this year, just as they are expected to increase lending.

“It puts the banks in a bit of a sticky spot,” she said in an interview with Bloomberg Television on Tuesday ahead of the reports.

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