Higher taxes and lower loan growth hit CCB

Listen to this article


China Construction Bank, one of the country’s “big four” state-owned lenders, yesterday reported a fall in full-year net profits due to higher taxes and slower new lending compared with deposit growth.

In the first results announcement since its US$9.2bn initial public offering in Hong Kong last October, CCB also said its net interest margin tightened due to rising funding costs.

The first of the big four to list overseas, CCB’s results are likely to be keenly studied by investors eager for an indication of the sector’s financial health. Two of the bank’s rivals, Bank of China and Industrial & Commercial Bank of China, are also preparing to list in Hong Kong.

Guo Shuqing, CCB’s chairman, yesterday said excess liquidity and growing competition were among the major challenges facing China’s banking sector, despite an improvement in the credit environment.

CCB’s non-performing loan ratio fell from 3.92 per cent in 2004 to 3.84 per cent in 2005.

However, net interest margin fell from 2.82 per cent in 2004 to 2.78 per cent last year, mainly because more customers put their money in lower-margin fixed deposit accounts.

“This year, we will try to manage the growth of deposits better to control our funding cost,” said Fan Yifei, vice-president.

Overall deposits grew 15 per cent while lending rose 10.4 per cent.

Credit curbs introduced by Beijing to cool the economy weighed on loan growth at CCB. The bulk of the bank’s loans are made to large state-owned companies, some of which were banned from borrowing money last year.

CCB also lagged behind the 15.5 per cent loan growth reported by private sector rival Bank of Communications last year.

But CCB said strong growth in fee and commission income helped to offset moderate loan demand.

In 2005 operating income rose 12.9 per cent to Rmb128.7bn (US$16.1bn). Pre-tax profit rose 8.1 per cent to Rmb55.36bn but net profit fell 4 per cent to Rmb47.1bn because of a sharp jump in income tax from Rmb2.16bn in 2004 to Rmb8.27bn in 2005.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.