State-owned lenders bullish on prospects despite epidemic

Top executives of China's four largest State-owned commercial lenders have reiterated that the country's economic fundamentals remained sound, while the overall asset quality of lenders has seen only a limited impact from the novel coronavirus epidemic.

Gu Shu, president of Industrial and Commercial Bank of China Ltd, said the bank remained bullish on the overall asset quality and its ability to maintain prudent operations this year.

"Our confidence is based on two factors: First, the long-term positive trend of China's economy has not changed, and the country still has enough policy tools to speed up recovery of enterprises and for production resumption. Second, ICBC has been constantly improving its risk management capacity and remains financially sound," Gu said.

The bank's NPL ratio has fallen for 12 consecutive quarters and fell to 1.43 percent by the end of 2019, down 0.09 percentage point from the level seen in 2018.

Wang Jiang, vice-chairman and president of Bank of China Ltd, said the epidemic will have a short-lived and generally controllable impact on its performance. Enterprises are speeding up work resumptions as efforts to control the outbreak have started bearing fruit, he said.

"The epidemic will not change the momentum of steady and long-term economic growth in China but will accelerate changes in lifestyle, people's behavior and business models. It will bring new opportunities and challenges for banks to accelerate digital transformation, business scenario construction and smart operations," Wang said.

The epidemic and volatility in international financial markets have increased economic uncertainty, said Liu Jiandong, chief risk officer at BOC. He said that the bank's overdue loans may increase in the first half of this year.

"We conducted scenario analysis and pressure tests and made different policies for potentially risky corporate clients, helping them find solutions to get through hard times," he said. By the end of last year, the NPL ratio of BOC was 1.37 percent, down 0.05 percentage point year-on-year.

Over the same period, Agricultural Bank of China Ltd witnessed a significant improvement in asset quality, recording a year-on-year decline in its NPL ratio of 0.19 percentage point to 1.4 percent.

The bank is paying special attention to any potential impact on its asset quality from the epidemic, said Zhang Qingsong, president of ABC.

"We highlighted risk assessment and monitoring of the industries, regions and clients that were severely impacted by the epidemic. At the same time, we took targeted measures to prevent and defuse risks … Based on our analysis, the impact of the epidemic on the asset quality of ABC is temporary and controllable," Zhang said on Tuesday.

Jin Yanmin, chief risk officer at China Construction Bank Corp, estimated that the bank's ratio of overdue loans to total loans will remain relatively stable but increase slightly for the whole of this year.

The Chinese economy has remarkable resilience and flexibility. Besides, CCB has a solid client base, a reasonably adjusted credit structure, and a comprehensive, proactive and smart risk management system, Jin said on Monday.

"Pressure tests have indicated that the impact on asset quality has been largely controllable after the first round of cases in China. It remains to be seen what would be the impact from the second round that is due to imported cases," he said.

Fiscal and monetary policies of different countries, as well as their policies to help corporate clients overcome financial difficulties will also affect the bank's asset quality, said Jin from CCB.

The NPL ratio of the bank stood at 1.42 percent by the end of last year, down 0.04 percentage point on a yearly basis.

Despite the rising challenges in a complicated situation, the major State-owned commercial banks achieved steady development last year. ICBC, CCB and ABC recorded yearly net profit growth of 4.9 percent, 5.32 percent and 5.08 percent, respectively, while BOC posted an increase of 4.91 percent in the same period.