Bad loans are staying at an 'excellent range'
Kwong Man-ki and Jane Cai in Beijing
The mainland's leading state-owned lenders expect non-performing loans to remain steady in the fourth quarter as the economy stabilises.
Li Lihui, president of Bank of China (BOC), said the non-performing loan level of the bank would remain stable in the fourth quarter and would improve next year, following the country's economy.
He said yesterday on the sidelines of the 18th national congress in Beijing that the bad loan levels of the mainland's banking industry had stayed below 1 per cent. "This is what we call an 'excellent range'," he said, adding that it is normal to see some volatility within the range.
The non-performing loan ratio at BOC, the mainland's fourth-largest lender by market value, fell slightly to 0.93 per cent in September from June, but the amount of non-performing loans grew 0.8 per cent to 64.1 billion yuan (HK$78.95 billion).
Li said his concern about the bank's bad loans arose from industries which had too much capacity.
Although some analysts said the non-performing loans of mainland banks will likely rise in the coming two to three quarters due to the lagging effect of the economic slowdown, lenders and the regulator were more positive.
Yang Kaisheng, president of the Industrial and Commercial Bank of China, said the bank's non-performing loan level will likely remain stable in the fourth quarter. The non-performing loan ratio of the mainland's largest lender by assets stood at 0.87 per cent at the end of September, 0.07 percentage points lower than at the end of last year.
Shang Fulin, chairman of the China Banking Regulatory Commission, said in Beijing that the non-performing loan level of the mainland's banking industry stood at 0.97 per cent at the end of September, much lower than the international average of about 3 per cent.
"Mainland banks' capability in risk management has improved," he said, adding that the difficulty in managing risk is increasing as the economic environment gets more complicated.
Banks' loans to government financing platforms has been a concern of industry watchers due to the rising default risk.
"The risk [of lending to government financing platforms] is manageable," Shang said, adding that the banks have sufficient cash flow to cover the loan balance, which was 9.25 trillion yuan in September.