UPDATE 1 – China Construction Bank posts third quarter earnings down 4.1%, non-performing loans up

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* CCB strains decrease in Q3 profit year over year

* Bad loans are increasing

* Posts an increase in impairment losses on COVID-19 (Adds details)

BEIJING / SHANGHAI, Oct. 29 (Reuters) – China Construction Bank Corp (CCB), the country’s second largest lender by assets, reported a 4.1% drop in net income for the third quarter on Thursday after a surge in bad loans and earnings an increase in provisions was recorded.

Net income fell to 68.21 billion yuan ($ 10.18 billion) in the three months ended September 30, from 71.15 billion yuan a year earlier, the bank said in a statement to the Hong Kong Stock Exchange.

CCB’s non-performing loans (NPL) ratio rose from 1.49% at the end of June to 1.53% at the end of the quarter, and the bank said it had “prudently accrued” due to the impact of the COVID-19 pandemic.

The net interest margin, an important measure of profitability, was 2.13% at the end of September compared with 2.14% three months earlier.

The lender had posted a 26.5% drop in net income in the second quarter, the steepest decline in more than a decade as it increased buffers to cover sour debt.

China’s economic recovery accelerated in the third quarter as consumers shook off their caution about the coronavirus and gross domestic product grew 4.9% year over year, faster than the second quarter’s 3.2% growth.

$ 1 = 6.7029 Chinese Yuan Renminbi Reporting by Zhang Yan and Cheng Leng in Beijing and Engen Tham in Shanghai Editing by David Goodman, Kirsten Donovan

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