Profit growth slows at Bank of China, AgBank

Profit growth slowed at Bank of China (BoC; 301988.SH, 3988.HKG) and Agricultural Bank of China (AgBank; 601288.SH, 1288.HKG) in the third quarter as bankers set aside more cash to cover the risk of bad loans, the Wall Street Journal reported. AgBank’s third-quarter profit rose 40% year-on-year in the third quarter, down from the 45% growth rate it posted between January and June. BoC’s third-quarter profit was up 9% yoy, down significantly from a 28% increase in the first half of 2011. Both banks are worried about possible non-performing loans on their balance sheets, and have increased cash reserves to cover potential losses. BoC has increased its reserves to US$612 million, triple what they were a year ago. AgBank reserves grew 9% to US$2.1 billion. Macquarie expects the nonperforming-loan ratio for China’s banking sector to rise to 1.64% at the end of 2013 from 1.06% at the end of this year.