A tight monetary policy could see the average annual profit
growth of banks dip to around 45 percent by the end of next year,
analysts said yesterday.
Aggressive measures to curb loan growth - including interest
rate hikes, raising the reserve requirement ratio, intense "window
guidance" and open market operations - will make it much harder for
banks to sustain this year's exuberant growth, said analysts.
Going on the results for the first three quarters, the 14
Shanghai-listed banks are likely to post year-on-year net profit
growth of 60 percent this year, analysts said, given sound
performances in both interest and non-interest income.
"But it's going to be hard for banks who still rely on interest
as their major income source to retain the same net profit growth
next year, given total loan growth is expected to slow to 13 to 14
percent in 2008," said Wu Yonggang, an analyst with Guotai Jun'an
Securities.
Wu predicted net profit growth of 45 percent for Chinese banks
in 2008, provided the reserve requirement ratio is raised to 16
percent by the end of next year. "But if the central bank raises
the ratio to 18 percent next year, that net profit growth will be
squeezed even more - to 43 percent," he said.
But he said banks' interest margin would remain stable next year
as pressure for rate hikes is likely to ease significantly next
year. Many analysts are expecting one to two more rate rises from
now until the end of next year, compared with five in the past 11
months.
She Minhua, an analyst with CITIC China Securities, forecasted
net profit growth of 40 percent year-on-year in 2008. But She said
the central bank is unlikely to use the reserve requirement ratio
as a credit control measure in 2008, as it is already at a record
high of 14.5 percent after the latest hike on the weekend.
"I believe the central bank will take other measures, such as
raising the interest rate by two to three times and speeding up the
appreciation of the yuan, rather than raising the reserve
requirement ratio to draw excess liquidity," She said.
Smaller banks are more likely to be hit by the government
measures, as their loan growth is comparatively faster than the
larger lenders', She said.
He added that the measures would have little impact on foreign
lenders, as their loan growth is comparatively stable in China.
Both analysts said that despite slower net profit growth next
year, Chinese banks are still expected to perform well due to the
booming stock market, which has boosted commercial banks'
intermediary businesses.
(China Daily December 11, 2007)
