China COSCO, the country's third most profitable company last year, is a common sight in Singapore.  Photo: Company

Translated by Andrew Vanburen from a Chinese-language piece in Beijing Times

LENDERS ARE in it for the money... and it shows.

While markets in Hong Kong and Mainland China may be off to a sluggish 2012, the performance of the PRC’s listed lenders last year was very impressive.

Now that all 2,403 Shanghai and Shenzhen-listed Chinese firms have issued their full-year 2011 earnings, we learn that banks rank tops among all industries, occupying seven of the top 10 best earner spots for the year.

As of April 30, all listed firms in the PRC must release their annual results, so more than a few eyes were keeping a lookout for the late announcing enterprises, thinking that bad news usually waits for the last minute to rear its head.

There was really no overriding theme to this most recent harvest, with some firms reporting staggering first-time losses while a fair number had standout, red-letter years that were anything but red.

One thing that can be said moreso about 2011 than previous calendar years is that the just-released results not only reflect core fundamental strengths (or weaknesses) of the reporting firms, but also clearly reflect the effect – positive or otherwise – of rather aggressive monetary and fiscal policy from Beijing on earnings last year.

Perhaps most important for investors is that the trends seen can be used to more accurately foretell the direction individual counters or even entire industries might take this year and beyond.

But another more troubling aspect to the 2011 flood of results -- as far as shareholders are concerned -- is the growth in executive salaries and other perks that are increasingly incongruous with the concerned company’s bottom line performance.

However, this much can be concluded... that is, no conclusions can be drawn from the body of results as to the concrete direction of the economy this year, or whether a hard landing can be avoided.

Another trend is glaringly obvious from the numbers.

Despite the rapid decline of earnings for a broad spectrum of industry players last year, it is clearly evident that financial sector firms of all stripes had a year approaching “banner” status, and all flirted with counter-cyclicality.

ICBC was China's top dog last year in terms of bottom line.
Photos: Company

Of the total 2,403 companies selling shares in either Shanghai or Shenzhen, total revenue rose 20.8% year-on-year to 22.46 trillion yuan.

However, their combined net profit didn’t do quite as well, improving by 11.6% to 1.93 trillion yuan.

This is far less impressive than the bottom line growth of 37.3% and 25.4%, respectively, in 2010 and 2009.

That makes 2011 the worst year for listed enterprises' net profit performance since the global financial meltdown took center stage in 2008.

In 2008, total revenue did rise, but the bottom line total for all listed PRC firms fell 16.9% compared to 2007 levels.

As for last year’s results, the major contributors to the poor bottom line performance of listed firms continued to be weak external demand, rising costs as well as a relatively tight credit environment at home.

But this didn’t do much to discourage financial institutions from doing what they do best – making money.

One of the main reasons for the poor bottom line performance last year among all the country’s listcos was a rise in financing costs thanks to higher borrowing rates.

The average financing cost increase reported last year for China’s 2,403 listed enterprises was up 30% year-on-year, meaning banks were laughing all the way to ... well, themselves.

The most profitable listed firm in China last year was the country’s biggest bank, ICBC (SHA: 601398; HK: 1398), which raked in a cool net profit of over 200 billion yuan for the first time.

Second on the list was fellow lender China Construction Bank (SHA: 601939; HK: 939) while a non-banking play – China COSCO (SHA: 601919; HK: 1919) -- came in third on stronger-than-expected shipping business.

Financial plays occupied seven out of the top ten earners last year in China, with their bottom lines rising 22.7% year-on-year to a whopping 956.7 billion yuan.

Apparently a softer economy has a silver lining for lenders.

See also:

KISSING COUSINS: PRC Market Rise To Carry Hong Kong

SHOW ME THE MONEY: What Happens To SOE Profits In PRC?

China IPOs Putting Pressure On Large Caps

NEW KID ON BLOCK: 21 A-Shares In Red; 4 In Hot Water

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