Income up 11% at ICBC

Net income growth at the Industrial Commercial Bank of China (ICBC), the world’s biggest lender by market value, slowed in the second quarter to 61.8 billion yuan (€7.75 billion), a rise of 11 per cent.

While the figures are fairly robust, the data is a sign of how the slowing economy in China is translating into a fall-off in demand for financial services and an increase in the numbers of borrowers defaulting on debts.

“The recovery of the world economy is slow and faces a complex situation; domestic economic growth has slowed,” the ICBC said in a statement.

The banking environment is not as easy as before, as the government maintains curbs on property and has not introduced a nationwide economic stimulus package like the one in 2008.

Overdue loans rose at the five top banks as the economy decelerated for a sixth quarter, and China’s liberalisation of interest rates is putting pressure on margins in the second half.

Despite slowing growth, ICBC makes more than JPMorgan Chase, Bank of America and Goldman Sachs combined.

In the first six months, ICBC’s profit rose 12.5 per cent to 123.2 billion yuan, which marks the seventh year in a row the bank has posted a record profit since it listed on the stock market in 2006.

At the end of June, China’s five biggest banks had 31 trillion yuan of loans outstanding, which amounts to almost half of the nation’s total.

Premier Wen Jiabao called for an end to the “monopoly” enjoyed by the big banks, as it’s hard to borrow from anyone else, but it is difficult to see how an end to their dominance will come about. Combined earnings of China’s five biggest banks increased 13 per cent to 203.6 billion yuan in the quarter, down from 33 per cent a year earlier.