Fitch: China's bank results to highlight rising risks

The US-based ratings agency, Fitch Ratings, published a latest report on China, expressing their take on upcoming earnings announcements for Chinese banks.

Key Points:

Chinese banks are due to release 2016 earnings reports this month.

The People's Bank of China's (PBOC) quarterly report has already pointed to a slowdown in the commercial banking sector's net profit growth last year, as well as a lower return on assets and equity.

Bank earnings reports are likely to confirm these negative trends. They are also likely to show that reported NPL ratios remained relatively stable, but banks are heavily managing NPLs via debt resolution initiatives.

Fitch expects net interest margins to remain under pressure in 2017. The average loan borrowing rate dropped 20bp in December from a year earlier, as a rising proportion of new loans were priced below the PBOC's benchmark rate during 2016 - often an indicator that more lending is going to SOEs at favourable rates