China Construction Bank

Big Four bank's 7.5pc bad-loan ratio impresses

PUBLISHED : Tuesday, 03 February, 2004, 12:00am
UPDATED : Tuesday, 03 February, 2004, 12:00am

China Construction Bank's bad-loan ratio fell to 7.5 per cent at the end of last year, a figure likely to boost interest in its planned listing.

The ratio stood at 12.54 per cent at the start of last year and 7.5 per cent is probably the lowest recorded by any of the mainland's Big Four state banks.

The ratio was compiled using the mainland's four-tier classification system, which is generally not as strict as international standards.

According to Fitch analyst Arthur Lau, the 7.5 per cent figure roughly equals 12.5 per cent under the tougher five-tier international loan classification system - a level which he says is still a remarkable accomplishment.

A wall of bad debt is the main factor deterring global investors from taking a stake in the mainland's growing banking industry.

A lower bad-loan ratio would help remove lingering doubts over China Construction's ability to operate as a 'good bank'.

A cleaner balance sheet will also help smooth the way for a Hong Kong listing expected to raise at least US$5 billion this year or next.

Last year, China Construction Bank devoted as much as 88.3 billion yuan towards writing off bad loans.