Arab Today, arab today chinese banks under pressure as bad loans rise
Last Updated : GMT 15:09:39
Arab Today, arab today
Arab Today, arab today

Chinese banks under pressure as bad loans rise

Arab Today, arab today

Arab Today, arab today Chinese banks under pressure as bad loans rise

Bank of China
Beijing - XINHUA

 The era of easy money seems to be drawing to a close for Chinese banks as annual results showed their bad loans piling up fast while profits slowed sharply last year.

All 16 lenders listed on China's A-share market have now released their annual earnings, all posting higher non-performing loans (NPLs) in 2015. Some saw bad loans jump more than 50 percent year on year.

Chinese lenders, including listed and unlisted ones, had 1.27 trillion yuan (196 billion U.S. dollars) of bad loans by the end of 2015, up 51.2 percent year on year, according to data from China's banking regulator. The ratio of NPLs to total loans had gone up for 10 consecutive quarters by the end of 2015.

Meanwhile, the combined net profits of all Chinese lenders climbed only 2.43 percent, compared with 9.65 percent in 2014, the data showed.

The Agricultural Bank of China, one of the country's "big four" commercial banks, was one of those under intensified pressure. It saw net profits edge up merely 0.7 percent year on year, while its NPL ratio rose to 2.39 percent from 1.54 percent a year earlier.

The increase in bad loans came as China moved to reduce the capacity of oversupplied industries and close "zombie companies," those that survive only on bailouts, to restructure and upgrade a slowing economy.

Facing extreme financial difficulty or already having been shut down, many firms were unable to pay back debts, and that had a knock-on effect on other firms tied to them in business, said Zeng Gang, a banking researcher with the Chinese Academy of Social Sciences.

Most non-performing loans went to manufacturing, wholesale and retail trade, as well as the mining industry, according to the banks' annual reports.

Meanwhile, dud loans in the country's mid-west rose more significantly than in the east.

"The mid-west has a high concentration of steel and coal firms, which are at the forefront of capacity reduction," said Xiao Yaofei, a researcher at the Guangdong Institute for International Strategies.

The asset quality pressure on Chinese banks will continue in 2016, global rating agency Moody's forecast earlier this month.

The passing of a time when banks made money effortlessly is in line with China's economic transition, said Mo Kaiwei, a researcher with the China Academy of Regional Finance.

"The banking industry goes with the economic cycle. It is quite normal that banks' asset quality and profits decrease when China's economy faces greater downward pressure," he wrote in an analysis article.

China's economic growth slowed further to 6.7 percent in the first quarter of this year as a result of an industrial glut, cooled property investment and sagging foreign trade.

Are the banks capable of digesting the bad loans and reining in the risks?

Mo is among the analysts who think so, citing fast growth in business revenue, steady income from interests and adequate loan loss provisions, expenses that are set aside as allowances for bad loans.

While banks' own profits have so far been used to write off bad loans, there has been consideration of a debt-equity swap program that would allow banks to exchange bad debt for stocks in the companies concerned. China is also ready to let banks issue asset-backed securities collateralized by NPLs.

Even at its current level, the NPL ratio of Chinese banks is still far below that in other major economies, whose NPL ratios range from 3 percent to 5 percent, Mo noted.

Chinese lenders' NPL ratio stood at 1.67 percent at the end of 2015, according to official data.

Mo believes rising bad loans are not necessarily a bad thing, as the phenomenon could force banks to be more prudent when extending credit and develop a more sophisticated business model.

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today chinese banks under pressure as bad loans rise Arab Today, arab today chinese banks under pressure as bad loans rise

 



Arab Today, arab today
Arab Today, arab today Mohamed Bahari prepares new collection for spring 2017

GMT 06:15 2017 Monday ,27 February

Mohamed Bahari prepares new collection for spring 2017
Arab Today, arab today 17.4 million tourists visit UAE in 2016

GMT 00:47 2017 Monday ,27 February

17.4 million tourists visit UAE in 2016
Arab Today, arab today Sheds light on major steps in 12-year career

GMT 06:07 2017 Monday ,27 February

Sheds light on major steps in 12-year career
Arab Today, arab today UN envoy sets out framework

GMT 07:25 2017 Monday ,27 February

UN envoy sets out framework
Arab Today, arab today Ayat Abaza says state TV presented major stars

GMT 03:52 2017 Sunday ,26 February

Ayat Abaza says state TV presented major stars
View News in Arabic - Business: مصارف
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Reading therapy relieves mental disorders

GMT 15:39 2017 Friday ,24 February

Reading therapy relieves mental disorders
Arab Today, arab today UK appoints 1st Scotland Yard chief in 188 years

GMT 05:14 2017 Thursday ,23 February

UK appoints 1st Scotland Yard chief in 188 years
Arab Today, arab today Penguins in the age of dinos

GMT 11:44 2017 Saturday ,25 February

Penguins in the age of dinos
Arab Today, arab today Pluto's unruly moons

GMT 06:31 2015 Thursday ,04 June

Pluto's unruly moons
Arab Today, arab today 'Constructive' Vauxhall talk with union

GMT 08:54 2017 Saturday ,25 February

'Constructive' Vauxhall talk with union
Arab Today, arab today Tesla back into red but revenue grows

GMT 07:27 2017 Thursday ,23 February

Tesla back into red but revenue grows
Arab Today, arab today Reasons for the delay 'On the Stairs of Servants'

GMT 06:42 2017 Saturday ,25 February

Reasons for the delay 'On the Stairs of Servants'
Arab Today, arab today Ex-yoga missionary unleashes rage

GMT 12:16 2017 Thursday ,23 February

Ex-yoga missionary unleashes rage

GMT 07:23 2017 Friday ,24 February

Ola Ghanem hopes to work with M.Ramadan

GMT 12:35 2017 Tuesday ,21 February

63-Year-Old Woman Delivers Baby

GMT 18:23 2017 Friday ,24 February

Fadi explains secrets of  Nancy Ajram's newlook

GMT 10:28 2017 Wednesday ,22 February

Milan laughs while Rome cries

GMT 19:45 2017 Monday ,20 February

Sarah Belamesh designs antiques of "ceramic"

GMT 10:51 2017 Saturday ,25 February

Pigs with edited genes show resistance

GMT 14:04 2017 Friday ,24 February

Messi visit will contribute in tourism

GMT 13:12 2015 Saturday ,09 May

Sheikh Sultan opens Sharjah Centre

GMT 22:42 2017 Thursday ,23 February

Nasima Gamei revives heritage in jewelries
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday