CHINA’S largest banks have warned of a tough year after posting their weakest half-yearly profit growth in at least six years as a slowing economy forces the lenders to make even more provisions for soured loans and squeezes interest income.

    Industrial and Commercial Bank of China (ICBC), China’s largest bank by assets, and peers Bank of China (BOC), Agricultural Bank of China and Bank of Communications last week reported another spike in bad loans in the first half and net profits that grew at most by 1.5 percent, a far cry from the double-digit growth banks enjoyed after the 2008 financial crisis.

    With China’s economy set to grow at its weakest pace in a quarter of a century this year, the lenders said they were bracing themselves for even more bad loans as industries ranging from steel to petrochemicals and property struggle.

    “We will continue to face pressure from nonperforming loans for a period of time,” ICBC president Yi Huiman said.

    The bank, also the world’s largest bank by assets, increased provisions for troubled loans by 74 percent from a year ago in the first half.

    In addition to increasing bad loans, China’s slowing economy raises the likelihood of more interest rate cuts, which would further pressure the banks’ net interest margins (NIM), the spread between the lending and borrowing rates that banks earn.

    BOC, the country’s fourth-biggest lender, said Friday it faces margin pressure in the second half of the year from interest rate liberalization. (SD-Agencies)