China CITIC sees asset quality deepen

China CITIC Bank Corp Ltd witnessed a substantial improvement in asset quality last year. Its non-performing loan ratio fell 12 basis points year-on-year to 1.65 percent at the end of 2019, hitting the lowest point in the last four years.

Its allowance coverage ratio increased by 17.27 percentage points to 175.25 percent over the same period, and the ratio of allowance for loan impairment losses to total loans was 2.9 percent. Both ratios reached the highest level over the last five years, said the Beijing-headquartered joint stock commercial bank in its annual results announcement issued on Thursday.

At the same time, China CITIC Bank accelerated the disposal of non-performing loans, with the principal of NPLs disposed reaching 80.6 billion yuan ($11.4 billion) last year, the highest in history. It recovered 5.87 billion yuan in written-off assets, 2.4 times the number in the past year.

The bank optimized asset structures and tilted loan resources toward low-risk and low-capital-consuming business. Personal mortgage loans, low-priced corporate loans and low-risk government loans accounted for over 60 percent of new on-balance-sheet loans, further improving asset safety and anti-cyclical resilience.

The unexpected outbreak of novel coronavirus, however, may have a negative impact on the bank's asset quality this year, for a fairly large number of companies suffered temporary hardships and a cash flow shortage due to the epidemic. The repayment capacity of some clients in hard-hit regions has also declined.

"Our balance of non-performing loans and NPL ratio has increased slightly since the beginning of this year, and NPL growth was mainly generated by credit cards," said Fang Heying, president of China CITIC Bank.

"Looking ahead to the full year, as China has basically contained the epidemic, we are expecting a rapid rebound of domestic investment and consumption and looking forward to the launch of strong incentive policies. The possibility for China to see a V-shaped recovery is high, and we will endeavor to grasp post-epidemic growth opportunities," Fang said at a news conference on Friday.

During the first two months of the year, the number of credit cards issued by the bank dropped 47 percent year-on-year, credit card transaction volume fell 5 percent and credit card loans fell 3 percent. But these figures have rebounded since mid-March. Currently, credit card loans have increased by more than 150 billion yuan from the beginning of this year.

"The demand (for consumption and loans) has just picked up. We think the figures will become better," Fang said.

The bank will step up credit card debt collection, conduct comprehensive risk screening for corporate clients, further increase the disposal of non-performing assets, and tackle price fluctuations in global financial markets with more prudent strategies, he said.

With improving asset quality last year, the profitability of China CITIC Bank reached a new high. In 2019, net profit attributable to equity holders of the bank was 48.02 billion yuan, up by 7.87 percent year-on-year, the fastest growth over the last six years.

Beating market consensus by 1.7 percent, the growth was primarily driven by scale expansion, fee income and cost control, said Xing Yanran and Lu Yilin, analysts with BOCI Research Ltd, in a report on Friday.

The bank vigorously developed inclusive finance, giving full support to private enterprises and micro, small and medium-sized enterprises to help achieve high-quality development of the real economy.

By the end of last year, its balance of loans for small and micro enterprises, individual businesses and small business owners, with the total single-account credit amount of up to 10 million yuan, reached 204.26 billion yuan, an increase of 67.9 billion yuan from the prior year-end.