Agricultural Bank of China Ltd., the nation's third-largest lender by market value, posted a 22 percent increase in second-quarter profit as it set aside less for bad loans, while lending and fee income rose.
Net income rose to 45.3 billion yuan ($7.4 billion) from 37 billion yuan a year earlier, based on first-half figures published by the Beijing-based lender today. That exceeded the 42.6 billion-yuan median estimate of 11 analysts surveyed by Bloomberg News.
Agricultural Bank's second-quarter profit expanded faster than income at Bank of Communications Co. and China Construction Bank Corp. (939) even as the economy slowed to 7.5 percent in the period, from 7.7 percent in the first quarter. Agbank's earlier provisions for soured loans are helping it outperform peers during the slowdown, according to Edmond Law, an analyst at UOB Kay Hian (Hong Kong) Ltd.
"Agbank has set aside the largest amount of provision against bad debt among the big five banks, giving it more room to grow its business," Law said before the results were published. "Its edge in faster profit growth will continue in the second half."
Shares (1288) of Agricultural Bank fell 1.5 percent to close at HK$3.29 in Hong Kong before the earnings were announced, extending this year's drop in the city to 14 percent. That makes it the worst performer among the five largest Chinese lenders.
Second-quarter profit at Bank of Communications, the fifth-largest, increased 13 percent, while No. 2 Construction Bank's climbed 9.7 percent. Industrial & Commercial Bank of China Ltd., the nation's biggest lender by market value, will report first-half earnings tomorrow, along with Bank of China Ltd., the fourth-largest.
Agricultural Bank set aside 10 billion yuan as provisions for soured loans in the second quarter, compared with 12 billion yuan a year earlier.
Non-performing loans rose to 86.7 billion yuan as of the end of June from 85.7 billion yuan in March, representing 1.25 percent of total advances. The average bad loan ratio of the five biggest banks stood at 0.97 percent as of June 30, according to the China Banking Regulatory Commission.
Outstanding loans at Agricultural Bank stood at 6.9 trillion yuan at the end of June, an increase of 8 percent from the beginning of the year.
Its net interest margin, a measure of lending profitability, narrowed to 2.74 percent in the first half from 2.85 percent a year earlier as the central bank cut interest rates twice starting in June last year while competition for deposits intensified.
To contact Bloomberg News staff for this story: Jun Luo in Shanghai at jluo6@bloomberg.net; Stephanie Tong in Hong Kong at stong17@bloomberg.net
To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net
