China’s banks face highest level of bad loans since 2004
PBOC advisor tells Beijing forum that NPL ratio is ‘being underestimated’, and urges government to push forward sector reform
Banks in China are facing their highest level of bad loans since 2004, and the situation is unlikely to improve short term, a senior official with China’s top banking regulator said on Thursday.
Outstanding non-performing loans (NPLs) across the banking sector exceeded two trillion yuan by the end of May, up by 280 billion yuan, or 14 per cent from the beginning of this year, Yu Xuejun, chairman of the Board of Supervisors for major state-owned financial institutions, under the China Banking Regulatory Commission (CBRC) told an industry forum in Beijing.
The NPL ratio of Chinese banks, meanwhile, climbed to 2.15 per cent of total bank lending, up 0.16 percentage point from the beginning of 2016.
By the end of the first quarter, the CBRC measured the NPL ratio at 1.75 per cent, the highest rating since 2009.
Loans that are overdue for more than 90 days are also on the rise, Yu said, putting added pressure on the banks’ risk control systems, debt provisions and profits.
Some commercial bank governors share the hope that the Chinese economy will improve and alleviate the NPL pressure — but in fact, that’s impossible short term
“The most important reason (for the rise in bad loans) is the continued economic slowdown,” Yu said, adding he expected bad-debt risk to continue rising in the near term.