BANK of Communications Co. (BoCom), China’s fifth-largest bank, said hitting 1 percent profit growth in 2016 will be a stretch.

    BoCom reported its fourth year of slowing profit growth yesterday, while the bank’s bad loan ratio increased for the 15th consecutive quarter.

    “To maintain 1 percent net profit won’t be easy,” BoCom’s president Peng Chun said.

    For the whole of 2015, net profit rose 1 percent from a year earlier to 66.53 billion yuan (US$10.22 billion), according to annual results.

    Borrowers have struggled to repay loans as the economy slows, prompting a dive in corporate banking gross profits, which fell 18.1 percent to 44.5 billion yuan.

    At the end of last year, the corporate impaired loan balance rose 30 percent to 44.284 billion yuan. In past performance results, BoCom has cited the manufacturing sector as a large source of corporate defaults.

    The rise in bad debt across China’s banks has prompted authorities to introduce unprecedented measures to try to help.

    BoCom’s nonperforming loan ratio rose to 1.51 percent by end-December, from 1.42 percent at end-September.

    The central bank is preparing to allow banks to accept debt-for-equity swaps, while freeing them to issue asset-backed securities with soured loans as the underlying asset to give lenders breathing space in the face of rising borrower defaults.

    Profit rose 1 percent to 14.5 billion yuan in the three months through December versus the same period a year prior, according to a calculation from BoCom’s figures.

    BoCom’s net interest margins, the difference between a bank’s borrowing rate and interest earned on loans, fell to 2.22 percent from 2.24 percent at end-September.

    The bank said in its annual results that the margin squeeze was “due to the gradual acceleration of interest rate liberalization.”

    Loan loss provisions, the amount of capital a bank has to set aside to buffer against bad debts, fell to 155.57 percent from 165.3 percent in the previous quarter. (SD-Agencies)