CHINA’S largest State banks said the impact of restrictions on movement imposed to slow the spread of the coronavirus could pull down asset quality as borrowers struggle to repay loans, though they are likely big enough to weather any fallout.

The comments came as four of the country’s largest State lenders posted estimate-beating fourth-quarter profit — but they bode ill for smaller lenders, who have less capital reserves.

China’s largest lenders — Industrial and Commercial Bank of China Ltd. (ICBC), China Construction Bank Corp. (CCB) and Bank of Communications Co. (BoCom) — posted annual profit growth of over 4 percent for 2019 due in part to improving asset quality.

A prolonged pandemic might break the upward trend with rising soured debt and shrinking net interest margins (NIM), a gauge of banks’ profitability, senior bankers said.

“We expect there will be an increase in overdue loans in the first quarter and first half,” Bank of China’s chief risk officer Liu Jiandong said after the lender published annual results. The bank’s president added that the impact is likely to be short-term and controllable.

ICBC president Gu Shu likewise said the outbreak “will put some pressure on our asset quality,” but that the lender is confident on its overall situation.

The provision coverage ratio at ICBC was 212.53 percent at the end of December, compared with 198.09 percent three months prior. CCB’s ratio rose to 227.56 percent from 218.28 percent in the same period.

Senior Bank of China and ICBC officials also flagged risk relating to recent global market turmoil, saying contingency plans would be in place to curb credit and operational risk abroad.(SD-Agencies)