(March 30): China’s biggest state-owned banks delivered profit gains last year after boosting lending to help cushion the economy from a slowdown triggered by the nation’s strict pursuit of Covid zero.

Industrial & Commercial Bank of China Ltd, the country’s biggest lender by assets, reported Thursday that net income rose 3.5% to 360.5 billion yuan (US$52.4 billion), short of analysts’ estimates. Other banks topped or met forecasts, including Agricultural Bank of China Ltd, whose profit rose 7.4% to 259 billion yuan last year. Bank of China Ltd posted a 5% profit increase, while Bank of Communications Co earlier reported a 5.2% gain.

China’s US$54 trillion banking industry has been pushing to extend more credit in the past year as it grappled with low demand. A strict Covid-zero policy, abandoned in late 2022, had weighed on economic growth and sapped consumer confidence. A persistent slump in the property market has also impacted business.

Analysts have been cautious about the outlook for banks, even after several of the big banks reported profits that beat estimates. Although China’s economic activity is rebounding this year after lifting Covid restrictions — with banks extending a record amount of new loans in January — headwinds still exist.

China’s push for state lenders to lower borrowing cost for small businesses and home buyers, coupled with a potential loan prime rate cut this year, could pressure margins in 2023, Bloomberg Intelligence analyst Francis Chan said in a note Thursday. Most of the big banks reported declines in net interest margins last year.