Slow­ing econ­omy takes toll

Sec­ond- quar­ter as­set qual­ity loses its value

China Daily (Hong Kong) - - BUSINESS - By WANG XIAO­TIAN wangx­i­ao­tian@chi­nadaily.com.cn

The as­set qual­ity of Chi­nese lenders de­te­ri­o­rated fur­ther in the sec­ond quar­ter as the econ­omy slowed, data from the China Bank­ing Reg­u­la­tory Com­mis­sion and the in­terim re­sults of listed banks show.

Do­mes­tic banks’ non­per­form­ing loans rose by 13 bil­lion yuan ($2.12 bil­lion) from April to June, the sev­enth con­sec­u­tive quar­terly in­crease, the CBRC said in an on­line state­ment on Wed­nes­day.

To­tal NPLs stood at 539.5 bil­lion yuan at the end of June, with in­creases across all cat­e­gories of banks — State-owned lenders, joint stock banks and ur­ban and ru­ral banks.

The seven-quar­ter streak of in­creases was the long­est in at least nine years, ac­cord­ing to data com­piled by Bloomberg News.

The over­all de­te­ri­o­ra­tion in loan qual­ity was also re­flected in the ini­tial first-half re­sults of China’s listed banks. As of Wed­nes­day, three of 16 listed com­mer­cial lenders had re­leased their in­terim re­sults.

Bad loans at the Shang­hai Pudong De­vel­op­ment Bank Co Ltd rose 2.3 bil­lion yuan half- on- half. The ra­tio of such loans to to­tal out­stand­ing loans was 0.67 per­cent as of June, up 0.09 of a per­cent­age point, said the lender on Tues­day.

Bei­jing- based Hua Xia Bank Co Ltd also ex­pe­ri­enced de­clin­ing as­set qual­ity. Its NPLs went up by 726 mil­lion yuan in the first half.

Its NPL ra­tio rose 0.03 of a per­cent­age point to 0.91 per­cent. In East China, the ra­tio reached 1.46 per­cent, it said.

Soured loans of In­dus­trial Bank Co in­creased 2.3 bil­lion yuan to 7.6 bil­lion yuan in the first half. Over­due loans, an in­di­ca­tor of fu­ture NPLs, surged by 4.5 bil­lion yuan to 7.7 bil­lion yuan.

Its NPL ra­tio rose 0.14 per­cent­age point to 0.57 per­cent.

Guo Tiany­ong, di­rec­tor of the Re­search Cen­ter of the Chi­nese Bank­ing In­dus­try at the Cen­tral Univer­sity of Fi­nance and Economics in Bei­jing, said the rise in NPLs was a nat­u­ral re­sult of the eco­nomic slow­down.

The China Busi­ness News on Wed­nes­day re­ported that as of June 30, out­stand­ing bad loans in the eastern prov­inces of Zhe­jiang, Jiangsu and Shan­dong to­taled 247.1 bil­lion yuan, ac­count­ing for 45 per­cent of bad loans na­tion­wide.

Jimmy Le­ung, Price­wa­ter­house­Coop­ers’ bank­ing and cap­i­tal mar­kets leader for China, said ear­lier that banks should now write off more bad loans us­ing their prof­its.

But bank prof­itabil­ity had de­clined be­cause of the do­mes­tic eco­nomic slow­down and govern­ment moves to lib­er­al­ize in­ter­est rates and curb credit ex­pan­sion.

The China Bank­ing As­so­ci­a­tion pre­vi­ously fore­cast that do­mes­tic banks’ net­profit growth rate would drop by about 8 per­cent­age points this year from last year’s 18.9 per­cent.

In­dus­trial Bank’s in­terim re­sults showed its profit growth of 27 per­cent was far be­low the 40 per­cent aver­age pace dur­ing the same pe­riod of the past three years.

The half-year profit growth rate of Hua Xia Bank was 20 per­cent, com­pared with 42 per­cent in the first half of 2012.

GENG GUOQING / FOR CHINA DAILY

All Chi­nese banks, in­clud­ing State-owned lenders, joint stock banks and ur­ban and ru­ral banks, re­ported an in­crease in their non­per­form­ing loans, which stood at 539.5 bil­lion yuan at the end of June. Such loans have in­creased for seven con­sec­u­tive quar­ters.

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