China's top bankers warn of margin pressure despite recovery

BEIJING/Shanghai (Reuters) -Two of China's top bankers on Monday warned of pressure on net interest margins - a key gauge of bank profitability - even after the country's five largest lenders posted robust first-half results.

China Construction Bank Corp's (CCB) "margin will keep narrowing to the end of this year," said the bank's chief financial officer Zhang Yi in an online press conference.

Meanwhile, Bank of China Ltd (BoC) expects net interest margins (NIM) to "still face a certain downward pressure," said vice president of the bank Wang Wei at a virtual media briefing.

The comments come after five of China's top banks, including CCB and BoC, posted robust half-year net profit growth on Friday and Monday.

AgBank posted 12.4% growth in first-half profits, while BoC posted an 11.8% increase over the same period, the biggest jumps since 2014 and 2013 respectively, as business activity recovered from the COVID-19 pandemic.

The results are in the same vein to those from Industrial and Commercial Bank of China, Bank of Communications Co Ltd and China Construction Bank Corp, all of which reported more than 9% first-half net profit growth on Friday.

Both AgBank and BoC reported stable bad loan growth.

BoC logged a non-performing loan (NPL) ratio of 1.3% at the end of June, the same as at the end of the first quarter, while AgBank's NPL ratio edged down slightly to 1.5% from 1.53% over the same period.

BoC, though, which is the most international of the five banks, said it expected soured debt to grow more offshore than onshore.

"New non-performing loans abroad are mainly concentrated in industries such as real estate and aviation that are continuously affected by the epidemic," said BoC's chief risk officer Liu Jiandong.

At BoC, NIM fell to 1.76% at the end of June from 1.8% at the end of the previous quarter. AgBank did not disclose its NIM.

(Reporting by Cheng Leng, Zhang Yan and Engen ThamEditing by Louise Heavens and Mark Potter)

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