China’s state-owned banks reported healthy profit growth in the third quarter, but big increases in loan impairments and decreases in their cushions to absorb losses pointed to accumulating stresses in the country’s financial system.
Industrial and Commercial Bank of China, the world’s biggest bank by market value, reported a 7.6 per cent increase in net profits from Rmb62.4bn ($10.2bn) to Rmb67.2bn in the July-September period, about two percentage points below forecasts. A relatively big rise in bad loans was one of the main sore spots for the bank – they increased at an annualised pace of 30 per cent in the third quarter.
Since the onset of the global financial crisis in 2008, Chinese banks have pumped out vast amounts of credit to power the economy, doubling their loan books in five years.