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Analysis on the Profitability of China's Commercial Banks (No 115, 2015)


——Based on Analysis of 21 Listed Banks

By Zhu Hongming & Lei Wei, Research Team on "Analysis of Listed Banks", Research Institute of Finance of DRC

Research Report No 115, 2015 (Total 4800)


The profitability of banks is one of the key factors to assess whether the banking system is sound or not. Influenced by various factors over the past few years, the profit growth in China's banking sector has been on a gradual decline. Especially in 2014, the previous double-digit growth fell for the first time to a single-digit one. Taking the operation of 21 listed banks as an example, this paper examines the profit growth of listed banks in 2014 and the causes for the growth decline. Meantime, it makes scenario analysis on the future profitability of the banking sector. It is demonstrated that China's listed banks in 2014 continued to enjoy good profitability and that the primary causes for the decline in the profit growth are the accelerated exposure of credit risks and the ensued sharp increase in the impairment losses of assets. In the future, China's banking sector will still face a severe internal and external environment. Based on relevant calculations, a negative profit growth for China's listed banks in 2015 is quite probable whether viewed under a positive, neutral or negative scenario.