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BANKINGTHE EUROMONEY 25

CCB: Growing well but dark clouds ahead

Every reported number in 2018 from CCB was impressive. But maintaining this momentum in the year ahead will require exceptional management.

China Construction Bank (CCB) exhibits contradictions typical of Chinese banking today. Profits look good, but there are big challenges ahead.

In November 2018, CCB reported a 7.68% year-on-year climb in third-quarter profit, continuing a trend that has been steady all year. The more detailed interim results, announced in August, showed every arrow pointing in the right direction: net profit up 6.1% to Rmb147.5 billion ($21.4 billion) for the half year; earnings per share up 7.3%; and improvements in everything from assets to deposits, net interest income to fees and commissions. The only thing pointing down was the one thing you want to point down, the non-performing loan ratio, now at 1.48%.

So why the dark clouds?

Even if you take Chinese NPL numbers at face value, there are reasons to expect them to come under considerable pressure. Most obviously there is the US-China trade war. That is clearly going to have an impact on mainland export businesses, and some of them will run in to trouble with repayments as a consequence. Also, it will slow economic activity, reducing sources of growth for big lenders.