Chinese banking shares are dropping as earnings margin tone, profit pain

(Bloomberg) – Shares of Chinese banks have dropped to poor earnings, with analysts involved that the global trade war will further undermine their profits. Borrowers were the worst performers in the Hang Seng China Enterprises index after some of them reported a drop in profit and lower margins. Industrial & Commercial Bank of China Ltd. dropped to 5.1% in Hong Kong, after China’s largest bank fell by 4% in the first quarter. Shares in China Merchants Bank Co. and Postal Savings Bank of China Co. dropped at least 5%. The financial health of Chinese lenders is closely watched while Beijing deepens a deepening trade dispute with the US. Banks’ profits were already under pressure after China strengthened financial stimulus late last year, applying the rates to loans and mortgage loans. Analysts are also concerned that the increasing trade war will damage the overseas business of the banks. Banks “continue to support the pressure on the China economy amid an uncertain economic environment, and this is clear in many banks reported in the net profits,” says Michael Chang, head of Asia finances at CGS International Securities HK. “Net interest margins are still on a downward lane, with no signs of any bottom amid probably continued financial relief.” Chinese officials have indicated that they will further leave financial conditions to strengthen the economy, suggesting that lenders will continue to face the margin pressure. China will reduce the relationship ratio and interest rates on the basis of domestic and international economic situation to ensure ample liquidity, the Deputy Governor of People’s Bank of China, Zou Lan, said this week. The move in bank shares drove a 0.7% drop in the hanging Seng China Enterprises Index, which had a broader progress in Asia. China Construction Bank Corp. Shares have dropped as much as 7.8% to eradicate this year’s profit. (Updates with a graph, analyst remark.) More stories like these are available on Bloomberg.com © 2025 Bloomberg LP first published: 30 Apr 2025, 09:25 am Ist