SHANGHAI (MarketWatch) -- Agricultural Bank of China Ltd. , the country's largest rural lender by assets, said its net profit rose 29% in 2011, boosted by strong growth in net interest income and fee income.
AgBank kicks off the 2011 reporting season for China's major banks, and its results herald solid earnings growth for the country's banking sector last year despite concerns about the quality of loans extended to local government financing vehicles, property developers and small and medium enterprises.
The state-run bank reported a net profit of CNY121.9 billion (US$19.32 billion) for the 12 months ended Dec. 31, up from CNY94.87 billion in 2010, although below the average CNY130.44 billion net profit forecast of three analysts polled earlier in a survey.
However, the bank indicated concerns about a potential increase in bad loans, which analysts said could pick up this year, although they said its provision would likely be sufficient to cover potential losses.
AgBank set aside a provision of CNY64.23 billion in 2011, up 48% from 2010.
"We will (in 2012) strengthen risk control in businesses regarding the real estate industry, local government financing vehicles" and industries that are highly-polluted or have capacity overhangs," the bank said in the statement.
AgBank has no plans to raise additional capital this year and can fully control risks from loans to local governments, President Zhang Yun said during a press briefing after the lender reported a 29% increase in its net profit for last year.
The Chinese bank's capital adequacy ratio stood at 11.94% in 2011, compared with 11.59% a year earlier, while the lender's non-performing loan ratio declined to 1.55% last year from 2.03% in 2010, according to its earnings report.
AgBank had CNY399.7 billion worth of outstanding loans to local government financing vehicles as of the end of last year, accounting for 7.1% of the bank's total loans, Vice President Pan Gongsheng said during a separate press briefing in Hong Kong after the bank issued its 2011 results.
Chairman Jiang Chaoliang said at the press briefing that the bank remains committed to a 35%-50% dividend payout ratio for the next three years.
Annual reports from China's major banks are closely watched by investors amid asset quality concerns, and AgBank's earnings report indicates some lingering concerns continue to plague China's banking sector.
The other three of China's Big Four banks--Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., and Bank of China--are scheduled to issue earnings within the next few days.
It is widely anticipated that Chinese banks will encounter a slowdown in loan demand this year, particularly on the corporate front, due to an expected slowdown in the domestic economy after Premier Wen Jiabao said the government has lowered the target for economic growth to 7.5% for 2012 after keeping it at a symbolic 8% for the past seven years.
Barclays Capital said it expects "increasing concerns about slower-than-expected loan demand and profit growth in 2012," and downgraded its outlook for Chinese banks to neutral from bullish, because most of the positive effects from Beijing's policy fine-tuning have been priced in.
But the structural change in China's growth to focus on private consumption instead of fixed asset investment "should eventually be positive for the banking sector as it raises capital efficiency and reduces mismatch risks," Deutsche Bank analysts said in a note in early March.
"It also implies that retail banking will take over corporate banking as the key source of future growth, which should disproportionately benefit the big four banks," in China the bank added.
Agricultural Bank of China's 2011 profit up 29% - MarketWatch
AgBank kicks off the 2011 reporting season for China's major banks, and its results herald solid earnings growth for the country's banking sector last year despite concerns about the quality of loans extended to local government financing vehicles, property developers and small and medium enterprises.
The state-run bank reported a net profit of CNY121.9 billion (US$19.32 billion) for the 12 months ended Dec. 31, up from CNY94.87 billion in 2010, although below the average CNY130.44 billion net profit forecast of three analysts polled earlier in a survey.
However, the bank indicated concerns about a potential increase in bad loans, which analysts said could pick up this year, although they said its provision would likely be sufficient to cover potential losses.
AgBank set aside a provision of CNY64.23 billion in 2011, up 48% from 2010.
"We will (in 2012) strengthen risk control in businesses regarding the real estate industry, local government financing vehicles" and industries that are highly-polluted or have capacity overhangs," the bank said in the statement.
AgBank has no plans to raise additional capital this year and can fully control risks from loans to local governments, President Zhang Yun said during a press briefing after the lender reported a 29% increase in its net profit for last year.
The Chinese bank's capital adequacy ratio stood at 11.94% in 2011, compared with 11.59% a year earlier, while the lender's non-performing loan ratio declined to 1.55% last year from 2.03% in 2010, according to its earnings report.
AgBank had CNY399.7 billion worth of outstanding loans to local government financing vehicles as of the end of last year, accounting for 7.1% of the bank's total loans, Vice President Pan Gongsheng said during a separate press briefing in Hong Kong after the bank issued its 2011 results.
Chairman Jiang Chaoliang said at the press briefing that the bank remains committed to a 35%-50% dividend payout ratio for the next three years.
Annual reports from China's major banks are closely watched by investors amid asset quality concerns, and AgBank's earnings report indicates some lingering concerns continue to plague China's banking sector.
The other three of China's Big Four banks--Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., and Bank of China--are scheduled to issue earnings within the next few days.
It is widely anticipated that Chinese banks will encounter a slowdown in loan demand this year, particularly on the corporate front, due to an expected slowdown in the domestic economy after Premier Wen Jiabao said the government has lowered the target for economic growth to 7.5% for 2012 after keeping it at a symbolic 8% for the past seven years.
Barclays Capital said it expects "increasing concerns about slower-than-expected loan demand and profit growth in 2012," and downgraded its outlook for Chinese banks to neutral from bullish, because most of the positive effects from Beijing's policy fine-tuning have been priced in.
But the structural change in China's growth to focus on private consumption instead of fixed asset investment "should eventually be positive for the banking sector as it raises capital efficiency and reduces mismatch risks," Deutsche Bank analysts said in a note in early March.
"It also implies that retail banking will take over corporate banking as the key source of future growth, which should disproportionately benefit the big four banks," in China the bank added.
Agricultural Bank of China's 2011 profit up 29% - MarketWatch
that too happened only in worldwide financial crisis only.
