Agricultural Bank of China Ltd., the first of the nation’s big banks to report third-quarter earnings, returned to profit growth with a 1 percent gain from a year earlier.
Net income for the three months through Sept. 30 increased to 48.9 billion yuan ($7.7 billion), a Hong Kong exchange filing showed on Friday. That compared with a 0.8 percent decline in the previous three months.
The lender’s bad loans increased by 19.6 billion yuan in the quarter, a similar increase as in the previous three months. The 179 billion yuan of soured credit on Agricultural Bank’s books is the most since it listed in Shanghai and Hong Kong in 2010.
Chinese banks’ nonperforming loans are understated according to analysts at firms including BNP Paribas SA, where analyst Judy Zhang estimated a level of 9 percent for Hong Kong-listed Chinese banks at the end of last year.
China’s economy expanded at the slowest pace since the global financial crisis in the third quarter, curbing demand for loans and adding to the risk of more credit going bad. Companies such as solar firm Baoding Tianwei Yingli New Energy Resources Co. are among those to encounter repayment difficulties.
Agricultural Bank runs the largest branch network among listed Chinese banks with more than half in rural and county areas, giving it access to stable and low-cost funding. The earnings report released on Friday didn’t give details of its net interest margin, which is a measure of lending profitability.
The central bank has cut interest rates five times since November.
— With assistance by Jun Luo