Residential mortgage loans show bad signs
The credit quality of mainland banks' residential mortgage loans is showing early signs of deterioration - despite a drop in the bad loan ratio of their overall property lending portfolios, a regulator revealed.
Non-performing property loans of all banks dropped 16.1 per cent year on year to 109.3 billion yuan by the end of last year, Shen Xiaoming, a deputy director-general of the China Banking Regulatory Commission department overseeing the Big Four state banks, said yesterday.
That translated into a non-performing ratio of 3.56 per cent on total outstanding property loans of 3.07 trillion yuan at the end of last year.
Although the non-performing ratio of the 1.8 trillion yuan outstanding residential mortgage loans stood at about 1.5 per cent at the end of December - more or less on par with the end-2004 figure reported by the Big Four banks in a People's Bank of China report in August - Mr Shen said: 'The ratio has begun to rise somewhat.
'Because of the long maturity of such loans and fluctuations of property prices, residential mortgages are just entering the period when, internationally speaking, the risk will become more apparent.'
At the end of 2004, the Big Four banks, which commanded 73.7 per cent of the property loan market in the country, reported 4.6 per cent of such loans non-performing, according to the central bank's report.
Despite the past year's asset quality improvement, property remained the fourth-largest sectoral contributor of banks' non-performing loans, accounting for about 7 per cent of problem bank lending at the end of last year, Mr Shen said.
The government has encouraged property ownership in recent years to help stimulate domestic consumption as a new engine of economic growth with the first residential mortgage granted in 1986.
For their low default ratio, residential mortgages have emerged as prized banking assets in a sector where almost 50 per cent of all loans were once classified as non-performing.
To cool the overheating in the property sector, however, the central and local governments last year introduced a string of measures, such as raising minimum mortgage rates and down payments as well as levying taxes on speculators.
In line with rising domestic interest rates, residential mortgage growth has slowed consistently since April 2004, to 15.8 per cent last year.
