CITIC takes measures to boost risk resistance in H1

China CITIC Bank Corp Ltd increased provisions for credit and other asset impairment losses by nearly 40 percent in the first half of this year, to improve its risk resistance capacity, in expectation for greater pressure on the asset quality of the banking sector.

The national joint-stock commercial lender headquartered in Beijing set aside 47.73 billion yuan ($6.94 billion) of provisions for credit and other asset impairment losses in the first half, an increase of 13.54 billion yuan from the same period of last year.

"We estimate that the pressure on the asset quality of the banking sector will increase. To enhance our ability to fight against risks, we increased our provisions for credit and other asset impairment losses to deal with the shock to our bank's asset quality, considering that the current government policy which allows pandemic-hit micro, small and medium-sized enterprises to temporarily delay payments of loan principal and interest will come to an end (on March 31)," said Fang Heying, executive director and president of China CITIC Bank, at a news conference announcing the bank's 2020 interim results on Thursday.

Because of the outbreak of COVID-19 and the large increase of loan loss provisions, net profit attributable to the equity holders of the bank fell 9.8 percent year-on-year to 25.54 billion yuan in the first half of this year, while its pre-provision profit rose 14.3 percent year-on-year, Fang said.

To repair the house before it rains, the bank has strengthened its risk resistance capacity. Its allowance coverage ratio was 175.72 percent at the end of June, up by 0.47 percentage points from the end of last year. During the same period, its allowance for impairment losses to total loans increased by 0.32 percentage points to 3.22 percent.

In the first half of this year, the bank disposed of 31.6 billion yuan of nonperforming loans, and its speed of bad loan disposal slowed down due to the pandemic. It will step up efforts to dispose of NPLs in the second half, said Hu Gang, vice-president and chief risk officer of the bank.

The balance of the bank's nonperforming loans stood at 77.29 billion yuan at the end of June, representing an increase of 11.17 billion yuan from the end of last year. Its NPL ratio was 1.83 percent, up by 0.18 percentage points.