THREE of China’s four big banks said they were bracing for slower economic growth this year, after they cut dividends and reported near-flat or falling quarterly profits last week.

    Banks are seeing margins dwindle following successive interest rate cuts, while highly-leveraged corporate borrowers are leaving banks with more soured debt in an economy that is growing at its slowest pace in about quarter of a century.

    “It’s really tough for commercial banks to make money,” said Bank of China (BOC) president Chen Siqing at an annual results news conference Wednesday. “China’s economy is challenged by big downward pressure, putting pressure on asset quality.”

    The world’s biggest lender, Industrial and Commercial Bank of China Ltd. (ICBC), reported fourth quarter profit that was unchanged from the same period a year ago at 55.4 billion yuan (US$8.55 billion).

    BOC’s fourth quarter profit rose 2 percent to 39 billion yuan over the same period, while China Construction Bank Corp. reported a 2.5 percent fall in profit in the fourth quarter.

    “Cutting dividend is the most logical thing to do given all that is happening,” said Benjamin Chang, CEO of Hong Kong-based LBN Advisers. “People are expecting the bad debt issue to deteriorate,” he added.

    While banks have ramped up lending during a government stimulus drive to revive economic growth, much of that lending went to industries where rapid expansion developed into oversupply as economic growth tapered, raising the risk of default and dragging on profits.

    As a result, Chinese banks’ nonperforming loans (NPLs) have ballooned to a 10-year high of 1.27 trillion yuan, or 1.67 percent of the all loans outstanding at the end of last year, according to data from the China Banking Regulatory Commission.

    Earlier last week, Bank of Communications, China’s fifth biggest lender, also reported flat profits, while its president Peng Chun said 1 percent net profit growth this year “won’t be easy.”

    All three of the banks cut dividend payouts for ordinary shares for this year in an effort to preserve capital. (SD-Agencies)