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Privately owned Chinese banks report YOY decline in Q3 NIM

China's privately owned banks, which extend microloans mainly to online shoppers, farmers and small businesses, were the only commercial bank type in the country to report a decline in net interest margin for the September quarter.

The third-quarter aggregate NIM of the country's 17 privately owned banks was 4.00%, down from 4.39% in the prior-year period, according to data from the China Banking and Insurance Regulatory Commission.

Despite the 39-basis-point contraction from the corresponding 2017 period, the aggregate NIM of privately owned lenders was still almost twice the industry average of 2.15%.

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All other categories of banks reported an increase in NIM over the same period. For instance, the rural commercial bank segment reported the second-highest NIM among Chinese commercial lenders, rising to 2.95% from 2.83% a year earlier.

Since Tencent Holdings Ltd. launched China's first privately owned bank, WeBank Co. Ltd., in 2014, these lenders often charge interest rates higher than traditional banks, as most microloans extended by these banks are unsecured and do not require collateral.

However, the Chinese government's clampdown on shadow banking in recent years has effectively closed off a source of funding that was once popular among privately owned banks, which have limited access to deposits or other cheap funding sources. This is turn drove up funding costs, eating into their margins.

But amid slowing economic growth and protracted uncertainty surrounding trade tensions, Beijing has urged the banking sector to extend more credit to small, struggling businesses, and some analysts expect funding costs to ease in the near term. This could mean margins at privately owned banks could stabilize, or decline at a slower pace.

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To see aggregate banking statistics for a specific country, go to the country's profile on the website by using the search function at the top of the site. In the left sidebar, click on "Aggregate Financial Highlights" under the "Banking Industry" section. Here is an example for China.
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