Financial repression is profitable: Chinese bank profits exceed those of the tobacco and oil industries

内地银行业暴利超过烟草石油 专家建议存款单边加息 (Chinese bank profits exceed tobacco and oil Expert suggests raising rates on CD deposits) Google Translations follow:

According to CBRC statistics, the first three quarters of last year, China's commercial banks realized a total profit of 817.3 billion yuan, up 35.4%, close to 2010 full-year profit after tax net profit, average profit margin of 22.1% of capital and operating costs 208.5 billion yuan, per capita profit of nearly RMB 400,000. According to this situation, I guess commercial banks in 2011 accumulated profits in excess of 1 trillion yuan, then the profits will be more than RMB 500,000 per capita.

The per capita number is based on employees. The article compares this with industrial sector profits, which were 3.67 trillion yuan, but spread over 87 million workers, for a per capita profits of about RMB 40,000.

China bailed out the banks a decade ago by holding down deposit rates and lifting lending rates, allowing the banks to pocket the spread. This also helped shift assets towards borrowers (state owned industry) and away from consumers. Foreign analysts have speculated there could be a similar policy to bail out the banks from bad real estate and infrastructure debts, but as the above article shows, the social mood may not allow it this time.

Q: so high banking profits What is the reason?

Mr Chan: The sources of bank profits so high a number of factors, first, the credit last year, the foundation is relatively large, although the growth rate is not so high in 2010, but growth is still very large, then the corresponding bank is big scale. Therefore, the corresponding operating profit was more.

The second aspect is the most basic factor, the relatively large deposit and loan spreads. The bank deposit and loan spreads is the main business income, but also the major source of profits. Our country's 16 listed banks, the first three quarters of last year, net interest spread revenues of more than 1.2 trillion yuan, accounting for 80% of total revenue, 71.7% at the five state-owned banks and 90% at joint-stock commercial banks . In other words, the 70-80% of the banks' operating income is from the deposit and loan spreads. Because this spread is provided by the State, the State to the bank a higher interest rate, banks can get more income, you can make more money, so this is a basic factor.