Research using Moody's Analytics BankFocus shows that the top-5 Chinese banks had static net profitability ratios in 2018 compared to the 3-year average. These banks include:
- The Industrial & Commercial Bank of China
- China Construction Bank Corporation Joint Stock Company
- Agricultural Bank of China Limited
- Bank of China Limited
- Bank of Communications Co. Ltd
This latest research report is titled "Chinese Banks: Stable Net Profitability is Insufficient to Aid Capitalization". Usually these reports are for subscribers only, but this one is available as a free download.
You can also listen to an executive summary of the report in this Bureau van Dijk Podcast episode featuring Moody’s Analytics senior research analyst Irakli Pipia:
Key analysis highlights
- The top-5 Chinese banks posted static return on average assets (ROAA) and return on average equity (ROAE) ratios as at Q3 2018. This was due to the contraction in non-interest income and higher provisioning expenses that offset improvements that these banks realized in the cost of funding and efficiency.
- The average net interest margin (NIM) of the leading Chinese banks compared favourably with the leading European banks that averaged 1.5%, but was weaker versus the large US banks' 3.3%.
- 4 out of the 5 Chinese banks improved their cost of funding in 2018 as a result of a more accommodative monetary policy by the People’s Bank of China (PBOC) as well as a slowdown in growth.
- However, when compared to global peers, the cost of funding for the leading Chinese banks was higher than the average for the US and European banks for the same period.
- All of the top-5 Chinese banks reported notable improvements in their efficiency ratios during the first three quarters of 2018. This is one of the strengths of the leading Chinese banks; with the cost-to-income ratios of below 35%, the top five Chinese banks compare favourably with their global peers.
Our free webinar on 20 February, “Exploring the latest profitability trends of banks in the US, Europe and China”, will feature research using BankFocus data.
Moody’s Analytics BankFocus can help you research and analyze banks, for counterparty credit risk, portfolio analysis, regulatory reporting and anti-money laundering due diligence. It combines renowned content from Bureau van Dijk and Moody's Investors Service with expertise from Moody's Analytics.