The biggest of China's domestic structured product providers reported financial results for 2016 this week, with a broad trend in climbing profits, despite a challenging 'new normal' at the People's Republic of China.

Agricultural Bank of China reported that net profit last year totalled RMB184bn (US$27bn), up from RMB181bn in 2015. Operating income fell 5.7%, to RMB510bn, while costs dropped 13% to RMB197bn, for net pre-tax profit of RMB227bn, down 1.8%. Earnings per share remained level at RMB0.55 per share. Its common equity tier 1 ratio as at the end of 2016 was 10.38%, up 0.14% on an annual basis and 1.29% against 2014, while the non-performing loan ratio dropped 0.02% on the year, to 2.37%.

The PRC banking industry faced multiple challenges, including inadequate credit demand, narrower interest spread and increased pressure on risk control, according to the bank.

The balance of Agricultural Bank's wealth management products increased by 3.4% on an annual basis to RMB1.63trn, including RMB1.15trn in retail wealth management products and RMB 0.48trn in corporate products, with over 20% principal guaranteed. Changes in the fair value of underlyings invested in by principal guaranteed products resulted in a RMB3.0bn hit to profit on financial instruments reported by the bank, for a loss of RMB1.3bn for 2016. Financial liabilities decreased by RMB129bn, or 30%, primarily due to active control on the size of principal guaranteed wealth management products that it issued, according to the bank.

The institution also highlighted that it 'actively promoted the innovation on the design and sales models of wealth management products (...) and launched various structured wealth management products linked with factors such as stock indexes, exchange rates and commodity prices, so that the scale of and the number of authorized customers for wealth management realized stable growth'.

Ping An reported a net profit of RMB72bn, up 11% on an annual basis, with earnings per share climbing 17% to RMB3.5 per share. The group's banking division reported a 3% increase in net profit to RMB23bn.

The group held RMB166bn of wealth management products in its insurance business's investment portfolio, accounting for 8.4% of the division's assets, in comparison with RMB142bn and 8.2%, respectively, for 2015. These included RMB124bn in fixed-income wealth maangement products, up 5.1% on the year, and RMB42bn in equity wealth management products, up 73% from the previous year.

Off-balance sheet wealth management products stood at RMB744bn, up from RMB587bn for 2015.

China Merchants Bank has seen net operating income climb 4% to RMB210bn, with pre-tax profit adding 5.1% to RMB79bn. Earnings per share for 2016 were RMB1.87, up 11% on an annual basis. The bank's equity tier 1 ratio stood at 10.09% as of December 31, 2016, up 0.16% on the year, while the non-performing loan ratioclimbed 0.19% to 1.87%.

The bank intends to enhance the offering of wealth management products and quality underlying assets by proactively developing asset management and investment banking businesses, and noted that the proportion of CMB's net-value wealth management products ranked well domestically and 'made positive progress in breaking hidden rigid payments'.

The balance of CMB's wealth management amounted to RMB 2.38trn, representing an increase of 30.49% as compared with the end of the previous year. According to the statistics of China Banking Regulatory Commission, as at the end of the reporting period, China Merchant ranked second among commercial banks in terms of the balance of funds obtained from wealth management products and the balance of funds obtained from off-balance sheet wealth management products.

The total amount of non-principal guaranteed wealth management products issued by the group after January 1, 2016 with a maturity date before 31 December 2016 was RMB 3.1trn, up 19% on an annual basis.

Industrial and Commercial Bank of China (ICBC) has reported net profit of RMB 279bn, 0.5% higher on an annual basis, with earnings per share unchanged at RMB0.77. The ratio of non-performing loans climbed 0.12%to 1.62%.

Net fee and commission income grew 1.1% on the year to RMB145bn, with RMB37.6bn generated from retail wealth management products and private banking, up 4.8% on an annual basis, and a further RMB20bn from corporate wealth management services, up 11.7% as compared with 2015. Growth in personal wealth managemnt products income were driven primarily by the insurance brokerage business, while corporate wealth management growth was on the back of an increase in fees, forex operations and bond issuance and underwriting services.

The balance of wealth management products as at the end of 2016 was RMB2.7trn. ICBC noted that net loss on financial assets and liabilities designated at fair value through profit or loss declined by RMB5.8bn, mainly due to a decrease in the bank's expenses in payment to customers related to structural deposits due to the changes of wealth management product structure.

Ping An has distributed 1,612 products in China, according to the SRP database. Agricultural Bank has added 1,241 products, while China Merchants and ICBC had 673 and 372, respectively.

Source: StructuredRetailProducts.com

Click on the links for the results announcements of Ping An, Agricultural Bank, China Merchants Bank and ICBC, respectively.

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