China Construction Bank Profit Rises

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Oct. 28 (Bloomberg) –- Bloomberg’s Mia Saini reports on China Construction Bank’s 3Q profit being in line with estimates, but showing the slowest profit growth in 5 years. She speaks to Angie Lau on Bloomberg Television’s “First Up.” (Source: Bloomberg)

Is out with third-quarter results.

Profit at china construction bank rose but bad loans are eating into margins.

Mia saini is on china bank watch and has this now.

I have been on the watch since over the weekend.

This is the first of the biggest to report.

Slowest profit growth in five years.

What went right?

They are lending to some of the smaller micro companies.

By that matters is because they tend to command fatter margins compared to the bigger companies that are able to give you a big size of the business but not pay that much in terms of overall margins.

That is why we care about that.

If you take a look, despite being one of the most profitable lenders, there is an increase in bad loans.

That is eroding margins.

Nonperforming loans rose to $13.5 billion.

Bad debt provisions rose.

That is the cash they put aside against the sour debt.

It is a lot lower compared to the nonperforming loans.

You would expect the bad debt provision to increase.

Take a look at the net interest margin.

We care about that because it is a measure of letting profitability.

That is a nine month-year.

Everything us -- else is 4-3 months.

You can see the quarters, the stock is off.

All of the chinese banks have had a rough ride so far this year.

It has not been a pretty picture.

Here is the catch.

They are making money.

Last money than they were last year but that is just what is happening with the broader chinese economy.

You see these bad debts increase.

We were talking about this earlier.

The chinese government has really made this push to expedite these banks expunging this bad stuff off of their balance sheet so they can have more of a pure balance sheet.

Most international banks encourage companies to do this.

Most banks don't have much on a has.

A lot of foreign investors, this kind of transparency is important.

Let's talk about the third quarter here.

As you said, -- how do you think that is going to impact chinese bank earnings?

You're going to hear all of those reports on wednesday.

You will have a real snapshot exactly of the health of the chinese economy.

Deutsche bank saying that if you take a look at the top nine chinese lenders, they are going to report a total third-quarter profit that will grow by 11%. they're saying it is going to grow.

What we don't have a sense for is how much of that is going to hurt their balance sheet.

It erodes profits.

According to deutsche bank, they say that the companies profit momentum is going to remain steady.

They do have a huge slice of the pie compared to their u.s. counterparts.

We are going to see a slowdown in the earnings potential because of the increase in sour debt.

Thank you for that.

This text has been automatically generated. It may not be 100% accurate.

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