Bank of Chongqing Co. Ltd. expected net interest margin to improve further in the second half despite the government's introduction of new benchmark rates, said Li Cong, general manager of asset and liability management department.
Li said during a second-quarter earnings briefing Sept. 2 that the lender expected to see "very limited" impact on its margins from the loan prime rates reform, which aims to reduce funding costs for the real economy.
"But over the mid- and long-term, we will adopt measures to improve our pricing power to reflect the volatility in funding costs," said Li, noting that such measures would include a revamp of its mechanism to approve and review loans, as well as amendment of contract terms for new loans. As of June-end, the city commercial bank's net interest margin rose to 1.99% from 1.73% a year ago.
The loan prime rates, which will be adjusted once a month, were set at 4.25% for one-year loans and 4.85% for five-year loans on Aug. 20.
Chinese lenders are reportedly required to price at least 30% of new loans with the lower loan prime rates by September-end, and to increase the proportion to 50% by year-end. Li said the lender is confident in meeting the targets.
"We plan to continue to boost the proportion of loan book as a share of total assets, in response to Chinese authorities' call to provide funding for the real economy," Li said.
As of June 30, its outstanding loans totaled 221.94 billion Chinese yuan, up 7.8% from a year ago. Its loan book accounted for 48.1% of total assets, up from 45.7% as of end-2018 and 42.9% a year ago, according to Li.
The city commercial bank's net profit for the first half rose 6.6% year over year to 2.42 billion yuan. Net interest income surged 24.2% year over year to 4.05 billion Chinese yuan, but net fee and commission income dropped 10.7% to 607.3 million yuan from 680.0 million yuan posted a year ago.
As of June 30, nonperforming loan ratio edged down to 1.34% from 1.36% as of Dec. 31, 2018. This compares to an average nonperforming loan ratio of 2.3% for the country's city commercial bank.
Chen Yao, general manager of risk management department, said the lender will "focus on localization and improve risk management capacities" to maintain a stable NPL ratio.
The bad-loan ratio stood at 1.12% for operations at the Chongqing city whereas the ratio was 2.78% for other regions, which include provinces of Sichuan, Guizhou and Shaanxi. Chongqing operations accounted for 77.43% of its outstanding loans, up from 75.66% as of Dec. 31, 2018.
As of Aug. 30, US$1 was equivalent to 7.16 Chinese yuan.
