Asset quality remains stable for Agricultural Bank in H1

Agricultural Bank of China Ltd continued to improve its credit risk management system and proactively defused financial risks, thus maintaining the stability of its asset quality in the first half of this year.

The nonperforming loan ratio of the large State-owned commercial lender fell 0.07 percentage points from the end of last year to 1.5 percent at the end of June, while the balance of its nonperforming loans increased by 10.23 billion yuan ($1.58 billion) to 247.34 billion yuan.

During the same period, the balance of its special mention loans was 259.66 billion yuan, representing a decrease of 44.68 billion yuan. The special mention loans accounted for 1.57 percent of the total loans, down 0.44 percentage points, according to the bank's 2021 interim results announcement released on Monday.

Zhang Qingsong, vice-chairman and president of ABC, said the bank's nonperforming loans in the western, Bohai-rim and central regions accounted for 76.2 percent of its total NPLs in the Chinese mainland. In terms of industries, its NPLs were mainly concentrated in manufacturing, leasing and commercial services, as well as retail and wholesale.

Zhang said the bank will pay close attention to risks in three key areas. The first are clients in traditionally high-risk areas such as low-end manufacturing, retail and wholesale. The second are some clients who have poor development prospects and weak financial performance but whose repayments of loan principal and interest have been deferred during the COVID-19 outbreak. Consequently, their asset quality may worsen as China will gradually exit from policies to hedge against risks associated with the pandemic. The third are some large and medium-sized enterprises with low efficiency and slim profits, government financing vehicles at relatively low levels, and clients in the traditional energy sector and the real estate sector.

The bank will conduct forward-looking research and analysis of risks, strengthen risk monitoring, adopt different risk management measures based on the five-category classification of loans, and make sufficient provisions for potential losses on loans.

"We expect that ABC will achieve stable performance and improvement in terms of full-year asset quality. Although China is still facing complex and serious internal and external circumstances, we believe that the Chinese economic fundamentals that will sustain long-term growth remain unchanged. As the state of operation of our clients is gradually improving, their default risks will become lower," Zhang said.

"ABC will keep strengthening control of asset quality, continuously optimize credit asset structure, ramp up the disposal, settlement and collection of nonperforming loans, and consolidate the foundation of asset quality," he added.

The bank achieved a net profit of 122.83 billion yuan in the first half, representing a 12.5 percent increase from the same period of last year.

The net profit growth was partly driven by a 6.1 percent year-on-year growth in the bank's net interest income to 283.36 billion yuan in the first half. The increase of its net fee and commission income by 8.8 percent to 48.15 billion yuan, the drop of its cost-to-income ratio by 0.1 percentage points, and the 3 percent decrease in its credit impairment losses also contributed to the net profit growth, Zhang said.