AGRICULTURAL Bank of China Ltd. (AgBank) yesterday reported a 4 percent dip in fourth-quarter profit and a spike in bad loans as manufacturers and retailers struggled to repay debt while economic growth slowed.

    China’s third-largest listed lender — the first of the “big four” banks to report earnings this week — also said transition toward market-determined interest rates will raise competition.

    “This year, industry net interest margin will be on a downward trend, first quarter profit is also likely to fall,” chief financial officer Zhang Keqiu said at an earnings briefing in Hong Kong, referring to a measure of bank income.

    Agbank, Bank of China Ltd., China Construction Bank Corp. and Industrial and Commercial Bank of China Ltd. are widely seen as bellwethers of an economy that the government projects will grow around 7 percent this year, the least in 25 years.

    To encourage lending as the economy slows, the central bank last month cut the amount of money banks must hold in reserve, and singled out AgBank for an extra cut to support agricultural enterprises, which usually struggle to attract investment.

    But at the same time, banks are having to contend with an increasing number of defaults brought about by borrowers’ inability to repay debt as credit conditions tighten and exports fall.

    Agbank reported its highest nonperforming loan ratio in three years, at 1.54 percent at end-December from 1.22 percent a year ago. Net profit fell to 27 billion yuan (US$4.35 billion) versus an average analyst estimate of 29 billion yuan.

    Bad loans to manufacturers rose to 3.69 percent from 2.86 percent a year earlier, while those to wholesalers and retailers jumped to 5.93 percent from 2.36 percent.

    Sectors that improved included transportation, logistics and postal services with bad loans falling to 0.36 percent from 0.59 percent, Agbank said, without laborating.

    AgBank president Zhang Yun said the lender received regulatory approval to open offices in Taiwan and Brazil, mirroring similar moves by peers in search of opportunities abroad as the economy slows. (SD-Agencies)