China’s “big four” banks have suffered a rare profit decline in the first half of the year, joining a growing body of financial institutions worldwide that have been hit by the coronavirus pandemic.
Bad-loan provisions rose as the pandemic hammered Chinese business activity, causing a historic first-quarter contraction and weighing on an economy that was already in long-term growth slowdown.
Bloomberg News said the profit declines — reported over the weekend — were the largest in more than a decade for the banks, which are closely supervised by the Chinese government and for years have typically posted slight but steady increases.
“The pandemic sent the world economy into a serious recession, posing heavier pressure on banks’ business operations and asset quality in 2020,” Industrial and Commercial Bank of China ICBC said in an earnings report.
ICBC, the world’s largest lender in terms of assets, and Bank of China both said first-half profit fell around 11 percent, while China Construction Bank and Agricultural Bank of China each reported a decline of around 10 percent.
Shares in the four banks, all listed both on the Hong Kong and Shanghai stock exchanges, were barely changed on Monday.
ICBC also indicated in its report that profit was likely impacted by government-directed initiatives to enlist financial institutions in the national pandemic recovery effort by extending credit to keep the economy steady.
The banks warned of further disruptions ahead.
“The global economy will face a variety of adversities in the second half of 2020, including sharp contraction in international trade and investment, turbulent international financial markets, restricted international exchange, economic de-globalisation and rising geopolitical risks,” ICBC warned.
The pandemic, which first emerged in China late last year, caused a 6.8 percent contraction in the Chinese economy — the world’s second-largest after the United States — in the first quarter.
Growth returned in the second quarter, with the economy expanding 3.2 percent, still a historic low.
The Chinese banks are just the latest institutions to report pandemic damage.
British-based, Asia-focused lender HSBC reported a 69 percent slump in earnings earlier this month, and top French bank Societe Generale announced a second-quarter loss of more than one billion euros.
UBS, Barclays and others also have reported major financial hits linked to the pandemic.
Read More: Covid-19 pandemic delivers rare earnings blow to Chinese banks