Soaring Banks’ Profits.doc

Soaring Banks? Profits The financial crisis is still haunting the world; the international banking giants are suffering depressed performance; and the Chinese economic growth is slowed while its entity economy meets difficulty… In spite of all those difficulties, the Chinese banks still get “unbelievable” huge profits. According to the 2011 financial reports of those listed domestic banks in China, all of them had a 30% yearon-year growth in net profits last year. Some scholars said that the “extravagant profits” were not only much higher than the industry, but also above the monopolized industries like tobacco and petroleum. For the source of profits in the banks – the loan-to-deposit interest rate spread, Prof. Sun Maohui from Shanghai Normal University, told CBF journalists that the regulatory department could require the banks to turn in part of their profits as the risk funds. But he also thought that the conditions for market-oriented interest rate have not been completely formed. The progress should be made based on the marketoriented benchmark interest rate formation. Systematic Dividends based on Interest Spread According to the statistical data from the Chinese Banking Regulatory Commission, the Chinese banking industry saw the accumulative profits of 817.3 billion yuan (USD 129.8 billion) in the first three quarters of 2011, up 35.4% from a year before. The amount of profits equaled the after-tax net profits of banks in the whole year of 2010. The average profit margin reached 22.1% while the profit per capita was close to 400 thousand yuan (USD 63.52 thousand) The CBF journalist found from the statistics that seven Chinese banks listed in the stock exchange markets of Shenzhen and Shanghai had already published their business growth forecast report by February 13. Among them, Shenzhen Development Bank forecasted that its net profits could increase by 60%-70% in 2011. Minsheng Bank and Huaxia Bank both made the forecast about over 50% year-on-