(Yicai Global) Sept. 1 -- Net profit at the Bank of Ningbo and the Bank of Hangzhou grew more than 10 percent in the first half as Chinese city commercial banks buck the general trend of falling profits in the country’s banking sector.

The top seven banks listed on the mainland stock exchanges which made the most profit in the six months to June 30 were all city-based commercial banks, Yicai Global gleaned from their semi-annual earnings reports.

The Bank of Ningbo led the way with year-on-year growth of 14.6 percent, followed by the Bank of Hangzhou with 12.11 percent and the Bank of Chengdu with 9.91 percent. Only the Bank of Zhengzhou and the Bank of Beijing, out of the 13 city commercial banks, reported a drop in growth.

Meanwhile net profit at the larger state-owned banks and joint-stock commercial banks all fell. The fifth largest commercial bank, Bank of Communications, fared the worst with profit falling 14.6 percent. On average, net profit at commercial banks was down 9.4 percent to CNY1 trillion (USD146.6 billion), according to the China Banking and Insurance Regulatory Commission.

Large banks have assumed more responsibility in supporting the real economy during the Covid-19 pandemic and this has affected their performance, said Dong Ximiao, chief researcher at China Merchants Finance Holdings.

They have saved businesses as much as CNY870 billion (USD127.5 billion) in expenditure through loan repayment deferrals, fee reductions, financial restructuring, lower interest rates and other measures in the first seven months of the year.

The provision coverage ratio, which is the percentage of funds set aside to cover potential losses such as bad loans, of large banks is much higher than that of city banks, whose scale of customer assets is a lot smaller, said Zhou Maohua, an analyst at the financial markets department of Everbright Bank.

“The level of provision coverage directly affects net profit figures,” he said. The overall provision coverage ratio of city commercial banks was 152.8 percent as of the end of June, significantly lower than that of joint-stock banks and large commercial banks which stood at 200 percent, he added.

Another reason why the performance of city commercial banks has outstripped bigger banks in the first half is because their growth rate last year was much slower, adding further emphasis to the comparison with this year, he added.

Editors: Tang Shihua, Kim Taylor