Chinese lenders could post flat or falling profits in 2020 despite earnings growth in the first quarter, according to the country’s central bank.
The Chinese economy has not been immune to the impact of the coronavirus pandemic and the nation’s banks now face financial difficulty.
In the first quarter of 2020, China’s commercial banks saw net profits of 600.1bn yuan (£69bn), up 5% year-on-year, due to the expansion of banks’ assets and lower management costs.
But banks could log zero or even negative profit growth within 2020, due to mounting bad loans and the fast draining of cash buffers, warns the research bureau of the People’s Bank of China (PBOC).
China’s banks need to continue supporting small and micro enterprises and surrender some part of their healthy profits, the PBOC article said.
In an effort to cushion the economy, small and midsize companies can delay paying loans and interest by a further nine months, until March 2021, and lending to SMEs by big commercial banks should grow more than 40%, said Premier Li Keqiang on Friday.
In March, China’s largest state banks said the impact of restrictions on movement imposed to slow the spread of the coronavirus could pull down asset quality as borrowers struggled to repay loans.