China's major commercial banks will face a tough year in 2016, as net profit growth for listed commercial banks is likely to slow down, according to a report released on Tuesday.
Net profits for listed commercial banks is likely to grow by just 1 percent in 2016, according to a report released by Bank of Communications, domestic financial news portal caijing.com reported on Tuesday.
The Bank of Communications' report forecast growth of 1.8 percent in net profits for listed Chinese commercial banks in 2015.
The outlook is even worse for the top five State-owned commercial banks in the country, as their net profits are not likely to grow at all in 2016, according to Lian Ping, an economist at Bank of Communications. The five banks are Bank of China, China Construction Bank, Agricultural Bank of China, Industrial and Commercial Bank of China, and Bank of Communications.
The slowdown in net profit growth for Chinese banks is mainly due to narrowing net interest margins, the spread between the rates at which banks borrow and lend money, as well as intensifying pressure for provisioning, or capital build-up to deal with future bad loans, according to the report.
The nonperforming loan ratio in China is likely to jump to 2.0-2.2 percent because the ongoing slowdown in the country's economy will continue to put pressure on the quality of commercial banks' assets, the report said.
However, another interest rate cut will be unlikely if the economy continues to maintain a stable trend, Lian noted.
