Interest rate cuts set to hit profits

Recent cuts in interest rates by China's central bank could strain the Chinese banking sector's profitability in 2013, but any extra pressure on profitability this year is unlikely, Standard & Poor's Ratings Services said in a report on Wednesday.

"These moves will enable banks to price their loans at levels that should allow them to compete more effectively with the bond markets. We estimate that the central bank's actions will weaken the banking sector's return on assets in 2013 by 10 basis points more than our previous forecast of a 20- to 25-point reduction," said Ryan Tsang, primary credit analyst of S&P.