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China Banks’ Profit Growth May Slow to 7% in 2013, BoCom

Chinese banks’ profit growth may slow to between 7 and 8 percent in 2013 from an estimated 17 percent increase this year, as non-performing loans climb amid a slowing economy and more borrowers resort to bond financing, according to Bank of Communications Co.

Banks may extend 9 trillion yuan ($1.4 trillion) of new loans next year, compared with a forecast of 8.4 to 8.5 trillion yuan this year, the Shanghai-based Bank of Communications, the nation’s fifth largest, said in a research note yesterday. Aggregate social financing, which includes loans, bond and equity offerings as well as trusts, may be between 16.5 and 17.5 trillion yuan, according to the note.

China will “properly expand” aggregate financing and maintain a “moderate increase” in lending next year as policy makers seek a higher “quality and efficiency” of growth, the official Xinhua News Agency reported after the annual central economic work conference that ended on Dec. 16.

The government has set its initial target for economic growth at 7.5 percent for a second year and tightened its inflation goal to about 3.5 percent, the lowest level since 2010, people briefed on the matter said this week. The government didn’t set targets for money supply or new loans at the meeting, the people said.

Bad loans at domestic banks may increase by 70 to 90 billion yuan next year while their net interest margin, a measure of lending profitability, will narrow about 15 basis points, according to Bank of Communications.

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