Ping An Bank profit growth slows in H1

A stand of Pin An Bank at an expo in Beijing, Oct 30, 2015. [Photo/IC]

Profit growth of Ping An Bank slowed down in the first half of 2016 as the economic slowdown cast a shadow on Chinese banks, with analysts calling for changes in the business models of traditional banks.

Net profit of the Shenzhen-based commercial bank grew 6.1 percent year-on-year to 12.29 billion yuan ($1.85 billion) in the first half. The growth rate was much lower than that for the year of 2015, which was 10.42 percent.

Operating revenue of Ping An Bank rose 17.59 percent to 54.77 billion yuan in the first six months of this year. The lender is gaining more revenue from non-interest business, which generated 18.57 billion yuan, 33.91 percent of total revenue, up 0.72 percentage point from a year earlier.

However, the nonperforming loan ratio climbed 0.11 percentage point from the start of the year to 1.56 percent by the end of June.

"The economic slowdown has posed serious challenges to banks, with profits declining and bad debts increasing," Ping An Bank President Shao Ping said at the company's interim results news conference in Shenzhen on Friday.

"But a positive sign is that bad debts of banks have not deteriorated in the first half of this year. This is also the case for Ping An Bank. And also, such new markets as cultural tourism have been developing robustly across the country. That is a major driver for Ping An Bank's growth."

A report by Sinolink Securities said the quality of Ping An Bank's half-year performance has exceeded its expectations. The report expects the bank to grow 9.3 percent on an annual basis in 2016, with advantages in comprehensive finance and innovation development.

The slowdown of the Chinese economy has put high pressure on banks. According to the China Banking Regulatory Commission, net profit of Chinese commercial banks increased only 3.17 percent year-on-year in the first half, much lower than the 6.32 percent annual growth rate recorded over the first quarter of 2016.

Liu Guohong, head of the Finance and Modern Industry Research Center at Shenzhen-based think tank China Development Institute, said the days when banks can rely on loan-deposit interest differences to make profits have gone. They now have to make changes against the backdrop of an unpleasant macro-environment and increasing competition from non-bank financial institutions.

"Demand among micro, small and medium-sized enterprises for loans is still large and banks still have space for growth," Liu said.