NPLs cripple CCB’s Q2 profits

Net income grows by only 9.7%.

China Construction Bank Corporation said its second quarter net income rose to US$9.82 billion from US$8.95 billion year-on-year.

It was the smallest profit increase in five quarters for China’s second-largest bank and confirmed CCB’s mounting bad loan charges as the Chinese economy continues weakening.

CCB’s non-performing loans or NPLs rose to US$13.1 billion at the end of Q2 from US$12.2 billion at the start of 2013 as borrowers failed to repay debt. The bank lent US$95.3 billion in the first half to take its total to US$1.32 trillion by June.

CCB set aside US$2.63 billion for potential bad loans in the first half compared to US$2.40 billion a year earlier.

China’s banks advanced US$376 billion in new loans in the second quarter, 3% lower from a year earlier following a surge in credit from January to March. Analysts expect the NPL balance to keep rising for the rest of year.

Analysts also said CCB’s earnings reflect how Chinese banks are being overwhelmed by rising defaults and weak lending demand. China’s stalled economy is experiencing the slowest pace of expansion since 1990.

Combined net income at Construction Bank and the other three members of the Big Four state-owned banks is expected to grow by less than 10% this year for the first time since they went public.