Net profit at the largest Chinese state-owned bank plunged by 11.22% to CNY107.8 billion (US$15.8 billion) in the past half year compared with a year ago as its impairment losses on assets, mostly on loans and advances, doubled to CNY66.5 billion.
Net interest income was up 8.37% to CNY196.9 billion while non-interest income was down 5.17% to CNY90.1 billion partly due to ‘a decrease in net trading gains’ year-on-year (YoY).
Credit cost saw the biggest fluctuation from 0.59% to 0.9% among key financial ratios while return on average equity dropped from 14.56% to 11.1% YoY.
For structured deposits on-balance sheet, personal deposits rose by 37.85% to CNY585.4 billion and corporate deposits increased by 39.9% to CNY346.9 billion YoY, bringing the total to CNY932.3 billion.
The bank designates some structured deposits as liabilities at fair value through profit or loss in order to ‘match derivatives and reduce market risk’. As at 30 June, the carrying amount of such liabilities was CNY31.3 billion, up 74.4% YoY.
Structured deposits, the main form of structured products in China, had seen an issuance surge when the total balance of Chinese state-owned banks broke a CNY12 trillion record in April, as reported by SRP.
Measured at fair value on-balance sheet, derivative assets at the bank were at CNY114.9 billion, up 23.1% YoY, while derivative liabilities were at CNY123.3 billion, up 36.9% YoY.
There are 83 equity-linked investments (ELI) issued by Bank of China in Hong Kong during the first half year, according to SRP data. The most popular equity underlyings were China Construction Bank (H shares), Industrial and Commercial Bank of China, HSBC and Geely Auto, while reverse convertible and knockout were deployed most as payoff.
China Construction Bank (CCB)
CCB also saw a slump of net profit in the first half year, which was down 10.77% to CNY138.9 billion YoY.
Net interest income grew by 6.41% to CNY266.5 billion while net fee and commission income rose by 4.34% to CNY80 billion YoY partly driven by a 21.34% increase of consultancy and advisory fees.
Operating expenses declined by 1.6% to CNY79.8 billion, and credit impairment losses surged by 49.22% to CNY111.4 billion.
Measured at fair value on-balance sheet, derivative assets were down 27.38% to CNY25.2 billion while derivative liabilities were up 14.66% to CNY38.7 billion.
SRP has not recorded any structured product issuance from CCB on the Chinese database YTD. The bank however had five dual currency structured deposits linked to the JPY/USD pair maturing in the first half of 2020.