China's banking sector posted another year of strong growth for 2010, ahead of their foreign counterparts in the country, according to KPMG's latest annual survey of China's banking sector.
The report notes strong profit growth despite the impact of government steps to restrict credit. This is mainly being driven by a rapidly growing deposit base, increased net interest margins and growth in non-interest income. Chinese banks have also continued their expansion overseas, largely through organic growth, by establishing new branches and subsidiaries.
KPMG's fifth annual Mainland China Banking Survey covers a record 184 banks, representing 85 percent of all banking assets in China and an increase of 30 banks over last year's survey. It also captures the financial information for 34 of the 37 foreign banks that were locally incorporated prior to year-end 2010.
Simon Gleave, Regional Head, Financial Services, KPMG China, says: "Year 2010 was an outstanding year of high growth and development for China's banking sector. We have seen expansions in pilot programmes by the CBRC, such as the roll out of new rural financial institutions and consumer finance companies, as well as the banking sector's willingness to focus on the development of new products and services. We also see evidence of this in the continued growth of non-interest income."
For the 173 banks that provided net profit figures for both 2009 and 2010, there were strong signs of profit volatility between banks as well as larger increases being made by smaller institutions. This is also played out by the variance in profit growth being made by different categories of banks: the large five commercial banks (28.74 percent); joint stock banks (46.81 percent); and city commercial banks (55.05 percent).
For the 172 and 179 banks that supplied lending and deposit figures respectively for both 2009 and 2010, the survey revealed loan growth of 19.5 percent and deposit growth of 18.7 percent. This also reveals an interesting contrast in comparison to the 2008/2009 statistics, as these figures illustrate deposit growth outpacing loan growth.
The survey also notes the onset of internationalization of the RMB, which has also added a new element to the banking sector and should be a strong source of growth for those banks with a regional or international presence. Gleave adds: "At their current stage of development, Chinese banks are still focused on the domestic market with relatively limited overseas interaction. This will change quite rapidly as the RMB makes its way on to the world stage. Our data in this report shows how quickly this process is unfolding and it will be exciting to watch this develop in the coming years."
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KPMG China has 13 offices (including KPMG Advisory (China) Limited) in Beijing, Shanghai, Shenyang, Nanjing, Hangzhou, Fuzhou, Xiamen, Qingdao, Guangzhou, Shenzhen, Chengdu, Hong Kong and Macau, with around 9,000 professionals.