Bank of China, one of the country’s big four state-owned banks, reported a record 11.5% drop in first-half net profit as it almost doubled the amount set aside to cover loan losses in the aftermath of the pandemic. Officials projected more credit risks in the second half, reported Caixin.
In the first half, the state-owned lender deducted RMB 66.5 billion ($9.69 billion) from profits to add to reserves against impairment losses, the biggest increase among the big four state-owned banks.
Significant increases in bad loan reserves were the main reason for the decline in Chinese banks’ net profit. In response to the impact of the pandemic on the quality of credit assets, banking regulators in the second quarter repeatedly urged lenders to increase loss provisions, appropriately control the growth of profits, and prepare for a sharp rise in nonperforming loans.
Bank of China’s domestic retail business — including credit cards and personal loans as well as the asset quality of overseas business — has been significantly affected by the pandemic and changes in the global economy situation, said Liu Jiandong, the bank’s chief risk officer.