FOUR of China’s top five State-owned banks reported higher quarterly profits and slower growth in bad loans, helped by a resilient economy and checks on the shadow banking sector.

The improved results from top lenders in the world’s second-largest economy come after successive interest rate cuts dented their interest margins — a key gauge of profitability — while loan defaults rose sharply among struggling borrowers.

Industrial and Commercial Bank of China (ICBC), the country’s top lender by assets, posted a 3.3 percent rise in third-quarter net profit, versus flat growth a year ago.

Agricultural Bank of China (AgBank), China Construction Bank (CCB) and Bank of Communications (BOCOM) also reported faster quarterly profit growth than a year ago.

ICBC, CCB and AgBank also reported declines in their nonperforming loan (NPL) ratios, as they dispose of more of their bad debt. A crackdown on unregulated shadow banking has also helped.

“The market has been talking about a potential Chinese banking crisis caused by NPLs since 2011,” said Chen Jiahe, chief strategist at Cinda Securities. “But after seven years and banks’ net assets increasing by over 100 percent, it’s now one of the most worthwhile investable industries.”

NPL ratios fell slightly at CCB, ICBC, BOCOM and AgBank, but rose at fourth-ranked Bank of China Ltd. (BOC), where third-quarter net profit was flat.

The banks’ quarterly results were “no big surprise,” said Hao Hong, head of research at BOCOM International, who said profit growth would probably slow in the fourth quarter of the year as the deleveraging campaign weighs on loan growth and off-balance sheet business, squeezing profitability.

For 16 listed Chinese banks, average net interest margins — the difference between interest paid and earned — shrank in the first half by 17 basis points to 2.03 percent, according to an analysis by ratings agency Moody’s. (SD-Agencies)