BANK of Communications Co. (BoCom), China’s fifth-largest listed lender by assets, Friday reported a better-than-expected 7 percent rise in third-quarter profit and tight control of its bad loans, the second major mainland bank to post positive quarterly results.

China’s largest banks are seeing improving margins and a slower build-up of soured debt, helped by aggressive bad loan disposals and government policy such as debt-to-equity swaps.

But not all lenders are enjoying healthier balance sheets. Risks are more significant at smaller, regional lenders as they lack sufficient capability to diversify in terms of geography, industry or clients.

New asset management rules due to come into play in 2020 have already squeezed smaller banks, which depend to a greater extent on income from the sales of wealth management products, analysts said.

BoCom posted a net profit of 16.53 billion yuan (US$2.38 billion) for the July-September period, up from 15.44 billion yuan a year earlier. The 7 percent rise was BoCom’s fastest third-quarter profit growth since 2012.

It was also above the 5.5 percent average rise in third-quarter net profit estimated by three analysts surveyed.

On Tuesday, China Construction Bank, the country’s second-biggest lender, reported a 6.6 percent rise in third-quarter net profit, as its bad loan ratio dipped and interest margins stabilized.

BoCom’s net interest margin was 1.47 percent at the end of September, up from 1.41 percent at the end of the second quarter. (SD-Agencies)