China’s commercial banks saw their profitability stabilize in the first three quarters after a first-half decline, even as their core profitability metric hovered at a historic low and bad loans mounted, reports Caixin. Net profit for commercial banks was flat year-on-year for the first nine months of the year at RMB 1.87 trillion ($263 billion), an improvement from a 1.2% drop in the first six months, according to data released Friday by the National Financial Regulatory Administration.
The lenders’ overall net interest margin (NIM)—a key gauge of profitability that measures the difference between interest income and interest expenses as a percentage of interest-earning assets—held steady at 1.42% in the third quarter, the same as the previous quarter and a persistent historic low.
The data highlight the challenging environment for Chinese lenders, which are squeezed by a low-interest-rate environment and government calls to support the real economy. While efforts to manage their balance sheets have helped shore up earnings, a simultaneous rise in nonperforming loans, particularly at smaller banks, signals growing pressure on asset quality and potential risks to financial stability.