ICBC: Braced for the trade war
Numbers are solid and money is flowing into the system, but ICBC must avoid the temptation to drift from its conservative approach to risk.
ICBC is the biggest and the most closely watched of China’s banks, a barometer for Chinese banking and the ebbs and flows of the national economy. With a trade war escalating, it is a tricky time to be that proxy.
Business is fine so far. ICBC’s half-year results, reported in August, showed first-half profits up from Rmb153 billion ($22.3 billion) to Rmb160.4 billion year on year, with most other metrics, from bad loans to net interest margin, steady. Full-year numbers for financial 2018 may prove to be better still, as China has poured money into the banking system and sought to support businesses – a reversal of the previous tightening approach and a consequence of the US-China trade war.
In the longer term, that trade war is clearly going to have an impact. It is probably partly for this reason that ICBC has said it will raise up to Rmb100 billion of preference shares to boost its tier-1 capital adequacy ratio. Chairman Yi Huiman says the bank is stress testing companies exposed to trade tensions, although at this stage he expects to maintain stable margins and asset quality.