UPDATE 1-China Construction Bank Reports 10.7% Profit Drop, Biggest Since 2005


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BEIJING / SHANGHAI, Aug. 30 (Reuters) – China Construction Bank Corp (CCB), the country’s second-largest lender by assets, reported a 10.7% drop in first-half profits on Sunday, the largest drop in January to June since its market debut in 2005.

Net profit fell to 137.6 billion yuan ($ 20.04 billion) from 154.19 billion yuan for the same period a year earlier, the lender’s filing on the Shanghai Stock Exchange showed.

This implies net profit of 56.8 billion yuan for the second quarter, down 26.5% from 77.27 billion yuan a year earlier, the largest quarterly decline since the fourth quarter of 2008, according to Reuters calculations.

The results highlight the impact of the pandemic and the local economic downturn on Chinese banks after resisting the global trend in the first quarter by posting higher profits and stable bad debt.

The CCB’s non-performing loan ratio stood at 1.49% at the end of June against 1.42% at the end of March.

Bad debts at the bank amounted to 245.5 billion yuan at the end of June, against 226 billion yuan at the end of March.

Its net interest margin, a key indicator of profitability, was 2.14% at the end of June, down from 2.19% three months earlier.

China’s main banking watchdog has called on state lenders to fully recognize bad loans on their balance sheets and increase their buffers to cover soured debt in the first half of the year, weighing on their profits.

China’s commercial banks overall posted a 9.4 percent drop in first-half net profit to 1 trillion yuan, according to data from the China Banking and Insurance Regulatory Commission.

At the end of the June quarter, the average non-performing loan ratio of commercial banks was 1.94%, according to commission data, the highest since 2009. (1 USD = 6.8647 yuan Chinese renminbi) (Report by Zhang Yan and Cheng Leng in Beijing , and Engen Tham in Shanghai; Editing by Himani Sarkar, Sam Holmes and William Mallard)

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