Bank of China deals with non­per­form­ing loans

China Daily (USA) - - BUSINESS - By JIANG XUEQING jiangx­ue­qing@chi­

Bank of China Ltd, the na­tion’s fourth largest com­mer­cial lender by as­sets, said it had stepped up res­o­lu­tion of non­per­form­ing loans be­cause it saw con­tin­ued growth in NPLs dur­ing the first three quar­ters of 2016.

The bank and its sub­sidiaries, re­ported non­per­form­ing loans to­tal­ing 146.03 bil­lion yuan ($21.55 bil­lion) at the end of Septem­ber, ris­ing 13 per­cent from the pre­vi­ous year. Its NPL ra­tio also went up 5 ba­sis points to 1.48 per­cent, the group an­nounced on Wed­nes­day evening.

“The Chi­nese bank­ing sec­tor iden­ti­fied the up­ward trend of non­per­form­ing loans, mainly caused by the eco­nomic down­turn, in­dus­trial trans­for­ma­tion and cor­po­rate re­struc­tur­ing, which will con­tinue for a while,” said Wu Qing, di­rec­tor of the com­pre­hen­sive re­search of­fice of the Re­search In­sti­tute of Fi­nance at the De­vel­op­ment Re­search Cen­ter of the State Coun­cil. “Banks have done a lot of work, such as in­creas­ing NPL write-offs and re­launch­ing debt-for-eq­uity swaps.”

To han­dle the rise in NPLs, Bank of China said it and its sub­sidiaries made stronger ef­forts to re­solve a to­tal of 87.5 bil­lion yuan of NPLs in the first three quar­ters, in­creas­ing by 23 per­cent from a year ear­lier. Dur­ing the same pe­riod, it ac­cel­er­ated NPL res­o­lu­tion mea­sures through the ex­plo­ration of new chan­nels, such as bad as­sets se­cu­ri­ti­za­tion.

On May 26, the bank is­sued 301 mil­lion yuan se­cu­ri­ties backed by non­per­form­ing cor­po­rate loans. Of the to­tal, 78 per­cent was a se­nior tranche worth 234.78 mil­lion yuan, with a fixed coupon rate of 3.42 per­cent, and the rest was an eq­uity tranche worth 66.22 mil­lion yuan.

Apart from ex­pand­ing chan­nels for bad as­sets dis­posal, the group also in­creased its im­pair­ment pro­vi­sions on do­mes­tic loans dur­ing the first nine months. As a re­sult, its im­pair­ment losses on as­sets amounted to 63.97 bil­lion yuan, a 42.49 per­cent in­crease from the same pe­riod of 2015. The ra­tio of al­lowance for loan im­pair­ment losses to NPLs rose by 2.11 per­cent­age points to 155.83 per­cent.

In spite of the growth of loan im­pair­ment pro­vi­sions, profit at­trib­ut­able to eq­uity hold­ers of the bank still went up 2.48 per­cent from the pre­vi­ous year to 134.81 bil­lion yuan dur­ing the first nine months.

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