When Bank of Chinakicks off the first-half results season for the country’s biggest banks on Thursday, it is likely to be seen as a trendsetter for the wrong reason.
Analysts expect it to fare the worst of China’s four leading banks, with profit growth in the single-digits, down from last year’s 19 per cent pace. The concern is that this slippage will not be an aberration but rather a sign of things to come for the bank and its peers.
Chinese banks, the state-owned giants that dominate the country’s financial sector, have traditionally relied on government-guaranteed net interest margins to provide about 80 per cent of profits. But in a landmark move this year, the central bank gave them more flexibility in setting benchmark lending and deposit rates, unleashing competitive forces that have already started to chip away at their margins.