China’s largest banks posted a drop in first-half profits in the midst of an ongoing pandemic, the first time since the global financial crisis over a decade ago.
A surge in bad debt and higher provisions led first-half profits at Chinese commercial banks to shrink 9.4 percent year-on-year, according to the China Banking and Insurance Regulatory Commission (CBIRC), wit the six largest banks posting a 12 percent drop.
In the second quarter alone, Chinese bank profits sunk 24 percent year-on-year to 426.7 billion yuan ($61.4 billion).
The broader mainland banking sector is expected to shed 3.4 trillion yuan ($490 billion) of bad loans in 2020 in order to contain financial risks fuelled by an economically crippling pandemic.
«Sacrifice Profits»
The sector could face more headwinds ahead with officials making calls to give up monetary gains. The governor of the People’s Bank of China, Yi Gang, urged mainland lenders «to sacrifice profits to benefit corporate borrowers» by reducing borrowing costs to the tune of 1.5 trillion yuan ($220 billion) or 75 percent of 2019’s full-year net profit.
Over the weekend, the CBIRC noted that the banking sector had already sacrificed more than 870 billion yuan of profits in the first seven months of 2020.
