fortunes of banks in Europe (see RBI 597) and the US
(see RBI 596), China’s banks have posted record
half-yearly profits.
Go deeper with GlobalData
And while they are generally less positive about the second half
of the year – more than one has noted that the country could suffer
a post-Olympics lull and decreasing demand for Chinese goods from
the US – they are still exuding confidence in the face of a
weakening global economy.
Looking at five of the major banks – Agricultural Bank of China
has yet to release earning figures – China Merchants Bank (CMB)
tops the list in terms of profit growth, with net income up 116
percent year-on-year to CNY17.1 billion ($2.5 billion). Industrial
& Commercial Bank of China (ICBC), the world’s largest bank by
market cap, posted the largest interim profit overall – CNY65
billion, up 57 percent.
Rampant fee and commission income helped drive up earnings
across the field: up 59.3 percent year-on-year at China
Construction Bank; 45 percent at Bank of China; 48 percent at ICBC;
and 50.1 percent at Bank of Communications.
Spending on credit and debit cards fuelled this non-interest
income – China Construction Bank (CCB), reported credit card
spending increased by 96 percent, for instance. CCB, 9 percent
owned by Bank of America, says it is now the country’s leading
credit card issuer in terms of card spending and card-sourced
overdrafts.
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By GlobalDataThe opportunity in terms of cards in China is clear: even a
relatively small player, Bank of Communications, says it now has
55.01 million debit and ‘quasi’ credit cards (akin to charge cards)
in circulation and a further 7.7 million credit cards. Spending on
the former hit CNY50 billion in the first six months of 2008; CNY39
billion for the latter.
Rival Bank of China, the sole banking sponsor of the recent
Beijing Olympic Games, said it now has 118 million debit cards and
14 million credit cards in circulation, with cardholder spending
volume in H108 hitting CNY141 billion, an increase of 35
percent.
It said its support of the Games, and the various related
marketing initiatives it set up, had a direct influence on retail
banking fees and commission income, increasing 50 percent in the
interim period to CNY10 billion.
Looking at the second half of 2008, the watchword was generally
‘caution’. Zhang Jianguo, president of CCB, said despite good
results in the first half, the bank will pay “close attention to
the changes in the macro-economic and financial situation”. Bank of
China said that while China’s economy will continue to develop at a
“rapid pace” in the second half of 2008, the bank was expecting
various financial risk factors and economic uncertainties to
increase.
The bank’s president, Li Lihui, also said the bank would
continue to underperform its peers in the second half due to the
fact it has the most international exposure of any Chinese player –
its overseas business accounted for 43 percent of profit in 2007
compared with only 3 percent for ICBC.
