China state-owned banks to post ‘sharp’ revenue decline: report

Banks are battling lower lending rates, ongoing property woes, and low interest margin.

China’s top five state-owned banks are all expected to post a sharp decline in revenue as well as narrower interest margins, in the shadow of a debt crisis in the property sector.

Record-low credit growth in July, default risks from housing developers, as well as missed payments by a private wealth manager linked to shadow banking are all expected to hit banks’ earnings, Reuters said in a report.

Banks are also battling lower lending rates and pressure from the government to prop up the economy.

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"The biggest challenge for Chinese banks is navigating the increasingly low net interest margin as the credit demand remains subdued in the real economy," said Gary Ng, senior economist at Natixis Corporate & Investment Banking.

"While there is support from greater exposure to government-related assets, it is more uncertain than ever on whether this can fully buffer the weak demand in households and corporates."

Here’s more from Reuters.