China’s largest banks capped a sixth year of record profits by posting a 21 percent average return on equity, more than twice the rate earned by U.S. and European competitors led by JPMorgan Chase & Co.
Chinese companies are spending more than ever to service debt after their borrowing almost tripled over five years, prompting strategists to warn of rising default risk and a threat to economic growth.
Lin Baozhen, a 61-year-old retired accountant in Shanghai, is a dream customer for Chinese banks. For a decade, she has kept her money at China Construction Bank Corp. in an account currently paying 3.5 percent interest.
The highest funding costs since 2008 may make it more expensive for China’s state banks to lend to commodity producing nations, as the world’s fastest-growing major economy tries to secure natural resources to fuel growth.
China moved its securities regulator Shang Fulin to head the nation’s banking watchdog, overseeing a 106 trillion-yuan ($17 trillion) industry that includes four of the world’s 10 largest lenders by market value.
Shanghai may cut its borrowing costs by almost two percentage points as China allows local governments to sell bonds for the first time, helping policy makers reorganize 10.7 trillion yuan ($1.7 trillion) of debt.
Industrial & Commercial Bank of China Ltd. agreed to the first Chinese takeover of a U.S. retail bank, boosting financial ties between the two largest economies as President Hu Jintao concluded a four-day visit.
Bank of East Asia Ltd., Hong Kong’s largest family-run bank, agreed to sell new stock to Sumitomo Mitsui Banking Corp., raising HK$3.3 billion ($426 million) to bolster its capital as it seeks to expand in mainland China.