Non-lending business has become a contributor to commercial banks' profit growth as interest rate liberalization has led to narrower interest margins and a slowdown of the traditional credit business, analysts said Monday.
As of Monday, four joint stock commercial banks - Industrial Bank, China Everbright Bank, Shanghai Pudong Development Bank (SPDB), and China Minsheng Banking Corp - had disclosed projections of financial performance for 2012, with most forecasting year-on-year profit growth over 30 percent while SPDB forecast 25.2 percent growth.
For these smaller banks to average over 30 percent profit growth is contrary to what most people predicted - a large fall in bank profits due to intensified competition and a narrower interest margin in traditional lending as a result of interest rate liberalization.
"Industrial Bank's profit is largely attributed to its non-lending revenues," Tang Yayun, a banking analyst with Northeast Securities, told the Global Times Monday.
Non-lending revenues for commercial banks come mainly from securities, interbank lending, investments in government and corporate bonds, and trading of financial derivatives and commodities such as gold.
Industrial Bank's traditional lending account forms less than 40 percent of its total assets, while its financing of discounted commercial paper - a type of interbank financing - is as high as 24 percent of its total assets, according to the bank's balance sheet for the first three quarters of 2012.
China Everbright Bank's total assets - including reserve, lending and investment assets - reached 2.28 trillion yuan ($367 billion), up 31.56 percent, driven by investment in bonds and other products, according to its filing with the Shanghai Stock Exchange on January 9. Similarly, Minsheng and Industrial Bank both saw substantial asset growth.
In contrast, lending assets grew relatively slowly. The total lending of China Minsheng Banking and SPDB grew modestly at 15 and 16.1 percent in 2012 from a year ago, according to their statements filed with the Shanghai Stock Exchange.
Due to their smaller size, however, the four listed joint stock banks do not represent the overall picture of China's banking sector, Tang said, because the large banks are more reliant on traditional lending.