Chinese banks expect to initiate a recovery in 2021 following their first decline in a decade in 2020. According to the research data analysed and published by ComprarAcciones.com, profits in the country’s banking sector as a whole fell by 1.8% last year based on preliminary statistics. It is estimated to increase by 4.5% in 2021, 6.5% in 2022 and 6.8% in 2023.
On the other hand, based on data from S&P Global, the global banking industry is still a long way from recovery. It is set to have cumulative credit losses totalling $910 billion in 2021, up from $890 billion in 2020. There will be a slight recovery in 2020 with total credit losses at $867 billion.
According to the China Banking and Insurance Regulatory Commission, the top six banks suffered a 12% profit decline in H1 2020. For the overall industry, there was a 9.4% drop in the same period, to 1 trillion yuan ($146.2 billion). In the first nine months of the year, the sector’s profits fell by 8.3%. However, a 29% rebound in Q4 led to the aforementioned single-digit annual decline (-1.8%).
Chinese financial institutions had to forego a total of 1.5 trillion yuan ($212 billion) in profit for the year. The industry as a whole disposed of 3.4 trillion yuan ($490 billion) in bad loans during the period. Loan loss provisions thus surged from 4.5 trillion yuan at the end of 2019 to 5.1 trillion yuan in 2020.
The 2021 recovery will result from clawing back some of the loan loss provision funds. Fee incomes are also expected to surge from 4% in 2020 to 7% in 2021.
Preliminary Q4 2020 results from some banks underscore the recovery trend. ICBC reported an upsurge of 35% in profits, while Everbright’s profits rose by 38%. Ping An Bank had an increase of 43% in profit during the quarter.