AgBank China results beat expectations
(31 March 2017 – Hong Kong) Agricultural Bank of China (ABC) reported a 1.8 percent rise in net profits in 2016, surpassing analysts’ expectations.
The bank posted full-year net profits of 184 billion yuan (US$34.9 billion), up from 180 billion yuan in 2015.
ABC’s profit rise came in spite of a major 41 basis point drop in the bank’s net interest margin, and a subsequent 38 billion yuan decline in net interest income.
Net interest income makes up the largest proportion of the income of all of China’s largest banks, 78 percent in the case of Agricultural Bank of China in 2016.
In its statement to the Hong Kong stock exchange, the bank attributed the decline in net interest margin to the consecutive reduction of interest rates by the People’s Bank Of China from November 2014 to 2015, the decline in the yields of its lending, investments and financing businesses compared to the previous year, and changes in VAT assessment.
“In 2017, the net interest margin will face great pressure, but the scale of the decline is likely to be less than in 2016,” said Lou Wenlong, a vice president at ABC.
Fee and commission income rose by 10.2 percent to 90.9 billion yuan, particularly due to increased revenue from wealth management and investment banking.
Agricultural Bank of China also posted a marginal improvement in its NPL ratio which dropped by two basis points to 2.37 percent at the end of 2016. Its overdue loan ratio and special mention loan ratio both dropped by 30 basis points.
The two measures refer to loans that are troubled, but not yet officially non-performing.
With regard to its bad loans more broadly, ABC’s president Zhao Huan said the bank would seek to manage its NPL situation in 2017 using a number of strategies including securitising bad loans and carrying out further debt for equity swaps.
“We carried out 70 billion yuan worth of debt for equity swaps in 2016, and we will see more in 2017,” Zhao said.
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