As the pandemic still continues to unfold, banks of China report what is said to be the biggest profit drops for the first time in a decade, leading them to make increased provisions against soured loans.
According to stock-exchange reports on Sunday, four of China’s largest state-owned banks said their net profit fell by over 10% year-over-year in the first half, while loan loss provisions bounced between 27% and 97% among the four banks.
Moody’s estimates that some of China’s biggest banks have an expected shortfall of $500 billion by the year 2025 to meet global capital requirements.
With authorities lending money to waive 1.5 trillion yuan ($218 billion) in profit, more than 1,000 commercial banks reporting a 24% decline in the Q2 profits. The economy of the nation shrank 6.8% in the first quarter after the government declared lockdowns to control the spread of coronavirus pandemic.
As economies fight potential losses induced by the pandemic, Bank of China made a statement of guarding against global financial market risks in the Q2.
Amidst tension between the nation and U.S. and uncertain financial conditions, there is a gradual recovery in the economy as president Xi Jinping continues to make efforts in making the economy more independent.