3 possible reasons behind China banks's steady NIMs

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According to Barclays, banks reported steady NIM, averaged at 2.68% in 9M13 and sequentially steady (q/q flat vs. -4bps in 2Q13 and -9bps in 1Q13).

This could be due to the following reasons: 1) reduced exposure to low-yielding interbank assets (-9.5% q/q); 2) higher loans/deposits ratios (+0.8ppts q/q); and 3) possible loan pricing recovery amid tight system liquidity.

Here's more from Barclays:

Taking off CRCB (+177% y/y in 3Q13 from a very low base), other banks' fee income growth slowed to +27% y/y in 3Q13 (vs. +43% in 2Q13), however.

High gross NPL formation likely continued in 3Q13 (1%/0.51% for Bocom/CCB on our calculations). The management teams confirmed that NPL pressure is still significant.

However, credit costs were down by 3bps q/q to 0.48% in 3Q13, supporting bottom line growth. We expect banks to lift their credit costs in 4Q13.