China’s Everbright Bank missed profit estimates due to investment losses and an increase in cash set aside for souring property loans, sending shares of the regional lender almost 13% lower in Hong Kong on Thursday, reports the Financial Times. Everbright, an important midsized bank in China, reported a 9% decline in annual net profit to RMB 40.8 billion ($5.6 billion), widely missing analyst expectations.
The bank’s profit was hit by a drop in net interest income—the difference between what banks pay on deposits and what they earn from loans and other assets—and a surge of cash put aside for bad debts in the last quarter of 2023. It recorded RMB 5.7 billion of impairments in financial assets/investments last year.
The bank’s results reflect how Chinese regional lenders, which are closely linked to heavily indebted local governments, are coming under increased pressure after Evergrande’s collapse in 2021 triggered a cash crunch for developers. China’s slowing economic growth, weak credit demand and declining investment from cash-strapped local governments are also weighing on lenders.