ICBC became the world's largest bank with total assets reaching 17.5 trillion yuan ($2.81 trillion) at the end of 2012. [Photo/Provided to China Daily]

Industrial and Commercial Bank of China Ltd, the world's largest bank by total assets, warned on Wednesday about challenges that Chinese banks will face in 2013, as the bank reported its slowest profit growth since its listing in 2006.

In an annual results statement released on Wednesday, ICBC said it gained a net profit of 238.7 billion yuan ($38.4 billion) last year, up 14.5 percent from a year earlier.

Like ICBC's Chinese counterparts, the bank's profit increase showed a substantial contraction compared with its 25.6 percent increase in 2011.

The effect of the central bank's move to widen the range of interest rates last year will loom large on banks in 2013, and the year will see all Chinese lenders face "great" challenges and tests on their asset quality, ICBC President Yang Kaisheng said.

2012 ANNUAL RESULTS ANNOUNCEMENT

"We must be on high alert on the trend and prepare in advance," he told a news conference in Beijing.

ICBC surpassed Deutsche Bank to become the world's largest bank with total assets reaching 17.5 trillion yuan at the end of 2012, with profits, core capital, deposits and market value all surpassing its domestic and global counterparts.

The lender's net interest margin, or NIM, a measure of profitability, rose by 5 basis points last year to 2.66 percent.

The nonperforming loan ratio declined by 0.09 percentage point from one year earlier to 0.85 percent, the 13th consecutive yearly decline. However, outstanding NPLs rose by 1.5 billion yuan during the same period.

"We have confidence in guaranteeing no wide range of asset quality deterioration and sharp pickup of NPLs. For this year, we hope to contain the NPL ratio below 1.2 percent."

Yang said the bank's net interest margin declined by 4 basis points in the first two months, signaling a continuous fall through this year. "But generally speaking, we don't think NIM will drop 'astonishingly' in the first quarter," he said.

He said about one-quarter of ICBC's deposits and half of its total loans will be repriced in the first two quarters, which will add downside pressure on the NIM.

The three other biggest Chinese State-owned lenders - China Construction Bank Corp, Agricultural Bank of China Ltd and Bank of China Ltd - all announced their weakest annual profit growth in years earlier this week.

Guo Tianyong, director of the Research Center of the Chinese Banking Industry at Central University of Finance and Economics, said he expected the average profit growth among banks will continue to fall in 2013, to somewhere around 10 percent.

"The economic growth still faces great uncertainties, and we can't expect a strong recovery this year. In addition, the authorities are gearing up to strengthen interest rate liberalization, with some major breakthroughs in the pipeline, which will substantially narrow banks' interest margin," Guo said.

Growth of total assets among Chinese lenders continued to fall in February, as total banking assets rose by 17.3 percent year-on-year to 133.5 trillion yuan by the end of last month, compared with the 18.7 percent growth by the end of January, according to data released by the China Banking Regulatory Commission on Tuesday.

Pan Gongsheng, a deputy governor of the central bank, said earlier this month he is confident that Chinese banks will maintain strong profitability in the future.

However, Hu Bin, a Moody's vice-president and senior analyst, said banks will face greater pressure this year as most loans will be repriced.

"In addition, the battle among banks to collect deposits will get fiercer as major State-owned lenders are likely to join others in hiking deposit rates," he said.

wangxiaotian@chinadaily.com.cn