Ping An Bank Kicks Off China Lenders’ Earnings With Profit Beat

(Bloomberg) -- Ping An Bank Co., the lending arm of China’s largest insurer, kicked off the earnings season for Chinese banks with better-than-estimated profit growth after ramping up loans to corporates even as the virus outbreak grounded the economy and led to a surge in personal defaults.

Net income rose 14.8% to 8.5 billion yuan ($1.2 billion) in the first quarter, the Shenzhen-based lender said in an exchange filing on Monday. That was the fastest growth in the first three months of the year since 2015, beating estimates of about 12% to 13%, according to analysts at Zheshang Securities Co.

The result could ease concerns among investors that Chinese banks are poised to post an unprecedented drop in profits this year as they grapple with the fallout of the coronavirus. Lenders in the world’s most populous nation face additional credit costs of almost 1.6 trillion yuan, S&P Global forecast earlier this month, warning the sharp increase would pressure their profitability and capital strength.

At least for Ping An Bank, the impact has so far been manageable. While its outstanding provisions for bad debt rose 15% in the first quarter, it managed to keep its ratio of non-performing loans unchanged at 1.65%. The bank’s loan portfolio to retail customers, especially its credit card business, took a heavy hit, with the default ratio rising to 1.52% from 1.19% in December.

Shares of Ping An Bank rose 4.2% as of 9:45 a.m. in Shenzhen.

The bank said it enacted emergency measures in January and expects the risk in its retail banking book to normalize. But analysts warned the worst may be yet to come.

“There will be some lag to see the full virus impact,” said Wang Jian, an analyst at Guosen Securities Co. “For Chinese banks, the uncertainties will unfold starting from the second quarter.”

China’s top leaders said last week that the nation is facing “unprecedented” economic difficulties and signaled that more stimulus was on the way. The economy contracted 6.8% in the first quarter and the nation’s outlook is also weak as a near global shutdown will hit export demand.

China’s listed banks may see their 2020 profit growth to slow by 2.8 percentage points to 3.7% this year, according to China International Capital Corp. The four largest state-owned banks are set to report their first-quarter results starting on April 28.

©2020 Bloomberg L.P.

With assistance from Bloomberg