Banks rake in profits

The banking sector was the most lucrative industry in the A-share market in the first half of 2013, according to a report. Mining and metal-producing sectors experienced a tough time.

Combined net profit of all the A-share listed companies was 1.1 trillion yuan ($179 billion), an 11.64 percent year-on-year increase. The combined income of all the A-share listed companies was 11.52 trillion yuan, an 8.63 percent year-on-year increase, according to statistics compiled by Wind Information Co Ltd, a financial information services provider.

The net profit growth rates of the five big lenders — Industrial and Commercial Bank of China Ltd, Agricultural Bank of China Ltd, China Construction Bank Corp, Bank of Communications Ltd and Bank of China Ltd — were all below 15 percent in the first half.Kim Kyung-Hoon / Reuters

"Net profit posted by companies from various sectors show that economic transformation moved forward at a slow and stable pace," said a report by Haitong Securities Co Ltd on Monday.

Seventeen listed companies posted more than 10 billion yuan each in net profit in the first half of 2013, among which 11 were banks. The combined net profit of 16 A-share listed banks totaled 610.15 billion yuan in the first half of 2013. It accounted for 56 percent of the combined net profit of all the 2,467 companies listed on the Shanghai and Shenzhen stock exchanges.

Industrial and Commercial Bank of China Ltd realized 138.35 billion yuan in net profit in the first half of the year, the most lucrative company in the A-share market, while Yanzhou Coal Mining Co Ltd reported a first-half net loss of 2.07 billion yuan after coal prices dropped, the biggest loss of a company in the A-share market.

Companies involved in realty development, information technology and infrastructure also reported positive incomes and net profits in the first half on the back of growing domestic demand.

While 1,432 listed companies reported growth in net profit, 1,035 reported declining performances.

The gross profit of companies may not increase soon because of continued pressure from high inventories, the report said.

Banking was the most lucrative sector in the A-share market based on net profit posted, but decelerating growth and declining share prices show that pressure for the sector remains amid rising non-performing loans and shrinking profit margins, according to Zhang Qi, an analyst with Haitong Securities.

The net profit growth rates of banks decelerated in the first half. That of the five biggest lenders in China by market value — Industrial and Commercial Bank of China, Agricultural Bank of China Ltd, China Construction Bank Corp, Bank of Communications Ltd and Bank of China Ltd — were all below 15 percent.

Corporate banks and urban commercial banks reported faster net profit growth. Industrial Bank, Bank of Beijing, Bank of Ningbo, China Minsheng Banking Corp and Huaxia Bank posted net profit growth of more than 20 percent.

Banks may face more pressure in the future after the recent liquidity squeeze, said analysts.

"Regulators in China view the recent credit crunch as a wakeup call showing that some banks may not be up to the task of coping with sudden changes in credit markets or liquidity shortages," said Frederic Lau, managing director of Promontory Financial Group China.

A total of 348 companies reported net losses, including companies from metal-producing, mining and manufacturing, tourism and catering sectors.

Companies in the hospitality and catering sectors reported negative growth in net profit in the first half of 2013 because of shrinking incomes after the central government released a circular calling for the curbing of extravagance using public money. In 2012 the hospitality and catering sector posted a 17.34 percent increase in net profit in the first half, while in 2013’s first half, the combined net profit of the sector dropped 138.69 percent.

Realty developers posted a combined net profit of more than 44 billion yuan, a more than 30 percent year-on-year increase.

"Despite inventory pressure, the income and net profit of developers may further increase in the second half of 2013 with recovering market conditions and rising prices," said Wu Yinzhou, an analyst with Shanghai Fulun Consultancy.