China Construction Bank Profit Exceeds Estimates as Interest Margins Rise

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China Construction Bank Profit Exceeds Estimates as Interest Margins RiseChina second-biggest bank China Construction Bank Corp. saw its profit exceed analysts’ estimates as lending margins soared.

Net income rose 9 percent to 38.2 billion yuan ($6.1 billion) in the three months ended Dec. 31, up from 35 billion yuan a year ago. This beat the median estimate of a profit of 36.9 billion yuan in a Bloomberg survey of 25 analysts.

Full-year net income surged 11 percent to 214.7 billion yuan, as seen on a statement on Shanghai Stock Exchange’s website.

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Though the profit exceeded estimates, China Construction banks and other lenders will likely face difficult times in future as the sluggish economic lowers asset quality and demand for loans. Beijing has discouraged giving of loans to overstretched industries, while Chinese lenders are racing against time to raise funds to meet the tougher capital requirements.

 “The results aren’t especially outstanding when compared with the other big banks,” Chen Xingyu, an analyst at Phillip Securities Research in Shanghai told Bloomberg. “Margins widened because liquidity was tight last year. 2014 will be even more challenging for the bank.”

The bank’s loan book in 2013 grew 14 percent from a year earlier to bring its total outstanding loans to 8.6 trillion yuan.  Loan book grew 12 percent in 2012.

The bad-loan ratio stood at 0.99 percent on Dec. 31, unchanged from 2012’s ratio despite the increase in soured debts from 74.6 billion yuan to 85.3 billion yuan over the period.

Net interest margin rose slightly to 2.74 percent, up from 2.71 percent as of September 30 last year. The bank’s shares have dropped 8.4 percent this year, compared to the benchmark Hang Seng Index which has fallen 5.3 percent.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com