Operating pressures to grow on listed Chinese banks

Listed Chinese banks will face rising operating pressures in the next one or two years due to slowing economic growth and narrowing profit margins amid monetary easing and relaxed interest rates, said a commentary by Moody's Investors Services on Monday.

Pressure on asset quality in particular is reflected not only in the rise in headline non-performing loan ratios, but also in the less stringent recognition of such loans, according to Christine Kuo, a Moody's Senior Vice President.

"We note that an increasing amount of loans overdue for at least 90 days are not classified as non-performing loans," said Kuo.

The report's conclusion was based on the 11 listed, Moody's-rated banks' interim results for the first half of 2015.

The banks are Industrial Commercial Bank of China Ltd, China Construction Bank Corporation, Agricultural Bank of China Ltd, Bank of China Ltd, Bank of Communications Co Ltd, China Merchants Bank Co Ltd, Shanghai Pudong Development Bank Co Ltd, China CITIC Bank Corp, China Everbright Bank Co Ltd, Ping An Bank Co Ltd and Bank of Ningbo.

Lenders' reports show that overseas commercial businesses are a major driver of growth for banks in China, said market insiders.

China Communication Bank reported overseas commercial businesses showing net profit of 2.12 billion yuan ($333.05 million) in the first half of this year, a 35.61 percent year-on-year increase while the Agricultural Bank of China's overseas branches reported net profits of 1.81 billion yuan, up 22.8 percent from a year ago.