Chinese banks brace for tough year as low interest rates, property crisis hit profitability
- Last week major banks reported declining net interest margins, a crucial measure of their profitability
- The net interest margins of state-owned banks declined by an average of 24 basis points last year, Jefferies’ analysts said
Last week major banks reported declining net interest margins, a crucial measure of their profitability. China Construction Bank, for example, recorded a margin of 2.02 per cent in 2022, the lowest since 2018.
“The senior management are taking the decline of our net interest margin very seriously as they are being squeezed by a lower loan prime rate (LPR) and companies and households opting for long-term deposits under the current economic environment,” said Sheng Liurong, the lender’s chief financial officer last Thursday during a results briefing.
“We believe that in the coming year, we will face some downward pressure on the net interest margin as the impact of lower LPR will continue to play out.”
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