Chinese Bank Shares Slump as Earnings Show Margin, Profit Pain
(Bloomberg) -- Shares of Chinese banks slumped following weak earnings, with analysts concerned the global trade war will further undermine their profit.
Lenders were the worst performers in the Hang Seng China Enterprises Index after some of them reported a drop in profit and lower margins. Industrial & Commercial Bank of China Ltd. fell as much as 5.1% in Hong Kong, after China's biggest bank saw its net income fall 4% in the first quarter. Shares in China Merchants Bank Co. and Postal Savings Bank of China Co. slid at least 5%.
The financial health of Chinese lenders is being closely watched as Beijing gears up for a deepening trade dispute with the US. Banks' profits were already under pressure after China stepped up monetary stimulus late last year, lowering rates applied on loans and mortgages. Analysts are also worried the escalating trade war will hurt the banks' overseas business.
Banks 'continue to face pressure of having to support the China economy amid an uncertain economic environment and this is evident in numerous banks reporting falls in net profits,' said Michael Chang, head of Asia financials at CGS International Securities HK. 'Net interest margins are still on a downward trajectory, with no signs of any bottoming amid likely continued monetary easing.'
Chinese officials have indicated they will further loosen monetary conditions to bolster the economy, suggesting lenders will continue to face margin squeeze. China will lower reserve requirement ratio and interest rates based on domestic and international economic situation, to ensure ample liquidity, the People's Bank of China's Deputy Governor Zou Lan said at a briefing this week.
The slide in banking shares drove a 0.7% drop in the Hang Seng China Enterprises Index, which bucked a broader advance in Asia. China Construction Bank Corp. shares plunged as much as 7.8% to wipe out this year's gain.
(Updates with a chart, analyst comment.)
More stories like this are available on bloomberg.com
First Published: 30 Apr 2025, 09:25 AM IST
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