Listed Chinese Banks Results Analysis for 2016

The latest edition of our banking analysis outlines China's economic and financial development, and the performance of Chinese A-share or H-share listed banks in 2016, following the publication of the listed Chinese banks' annual results. The report provides an overview of hot industry topics, as well as an outlook for the domestic economy and banking industry for the year ahead.

The global economy grew slowly in 2016, yet remained on track for a modest recovery in a year characterised by the presence of 'black swan' events, populism, anti-globalisation, trade protectionism and global political instability, and regulatory trends under supply-side structural reforms in China.

China moved forward with its financial reform agenda, with efforts in the continued liberation of the RMB exchange rate, the adoption of an advanced macro prudential assessment model, the establishment of privately-owned banks and consumer finance companies, the pilot programme that allows commercial banks to participate in combined debt-equity investments into startups and small businesses, the non-performing asset securitization plans, the marketization of debt-for-equity swap, and the creation of the Shanghai Commercial Paper Exchange. The People's Bank of China also maintained its prudent and neutral monetary policy to ensure financial market stability.

Incumbent commercial banks are feeling pressure in view of softening credit demand, narrowing interest rate spreads and rising non-performing loans. With technology stimulating innovation, allowing businesses and start-ups to discover new ways to raise capital, incumbents need to embrace new and innovative ways to do business and to operate in a more environmentally-friendly fashion.

Over the coming year, we expect the following themes to dominate the Chinese banking landscape: organic economic growth fuelled by the supply-side structural reforms; increased and optimised investment in mega-scale national projects; financial technologies; and further financial regulations.

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