Chinese banks should do more online business

Ernst & Young also recommends they develop their intermediary business.

Global professional services firm Ernst & Young noted that despite a slowdown in profit growth by China’s listed banks, growth of income from fees and commissions rose by 24% in the first three months of 2013 year-on-year. This was a large improvement on the 17% rise between 2011 and 2012.

Geoffrey Choi, financial services partner at Ernst & Young Hua Ming LLP, said income from intermediary business accounted for only 23% among Chinese lenders, suggesting huge room for further development when compared to international counterparts.

In 2012, net profit growth of Chinese listed banks was 17%, down 12 percentage points from 2011. In the first quarter of this year, profit growth slumped to 13% as against 25% year-on-year.

"Banks must continue to optimize their international capital allocation, alter the development mode which seeks profits based on consumption of capital and improve their capacity to accumulate capital," Choi said.

The People's Bank of China believes that major Chinese banks might see a capital shortage of US$6.4 billion in 2014 if they kept growth and internal financing at current levels.