Jun 03, 2024 07:36 PM

Chart of the Day: Metric of Chinese Banks’ Profitability Hits Lowest Since 2010

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A key profitability metric for China’s commercial banks dropped to its lowest in 13 years in the first quarter, weighing down their profit growth, official figures show.

The banks’ net interest margin (NIM) came in at 1.54% in the three-month period, down from 1.69% last year, figures released Friday by the National Financial Regulatory Administration (NFRA) showed.

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China's commercial banks' net interest margin (NIM) dropped to 1.54% in Q1, the lowest in 13 years, from 1.69% in the previous quarter.
The decline in NIM contributed to a slowdown in net profit growth to 0.7% year-on-year in Q1.
The nonperforming loan ratio remained stable at 1.59%, and further declines in NIM are expected due to lower returns on interest-earning assets and high liability costs.

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Who’s Who

China Merchants Securities Co. Ltd.: China Merchants Securities Co. Ltd. is referenced in the article through its chief banking analyst, Liao Zhiming, who commented on the factors contributing to the decline in Chinese commercial banks' net interest margins. He cited pressures on both asset and liability sides, including lowered loan prime rates and high deposit rates.

AI generated, for reference only

What Happened When

last year：: The national loan prime rates (LPRs), the country’s benchmark lending rates, were adjusted downward.

at year-end 2023：: The one-year LPR and its five-year-plus counterpart — a reference for mortgage rates — stood at 3.45% and 4.2%, respectively.

the first quarter of 2024：: China’s commercial banks' net interest margin (NIM) dropped to its lowest in 13 years and their net profit growth was just 0.7% year-on-year.