China Banks’ Profit Growth May Slow on Margins, Bernstein Says

Chinese banks will report slower profit growth for the third quarter as net interest margins narrowed further and credit costs rose, analysts at Bernstein Research said.

The lenders may post net income growth of 10 percent, compared with 14 percent in the second quarter and 24 percent in the year-ago third quarter, Hong Kong-based Mike Werner, Hua Cheng and Wangshu Qiu wrote in a note published today. China Construction Bank Corp. may beat the market consensus estimate by 13 percent and Bank of China Ltd. by 7 percent, they wrote.

Net interest margins may have narrowed by an average of four basis points, and smaller banks such as China Merchants Bank Co. and China Citic Bank Corp Ltd. faced the greatest compression, the analysts wrote. The central bank allowed lenders to offer a premium to the official deposit rate and wider discounts to the lending rate during the quarter, speeding up interest rate deregulation.

Industrial & Commercial Bank of China Ltd., the world’s most profitable lender, and other Chinese banks are scheduled to publish third-quarter earnings later this month.