China Construction Bank braces for rise in bad loans
The bank says urgent risk control measures are necessary with a surge in overdue loans in the first half raising the prospects of a default crisis
China Construction Bank is likely to come under pressure from an increase in bad loans in the second half of this year, after reporting a non-performing loan ratio of less than 1 per cent at the end of June, the bank's chairman, Wang Hongzhang, told a press conference in Beijing yesterday.
CCB, the mainland's second-largest lender by assets, said in its interim report, released on Sunday, that its NPL ratio was unchanged in the first half of the year at 0.99 per cent.
"However, overdue loans surged over the period, which could sow the seeds for a default crisis if no proper risk-control measures are taken," Wang said.
As a precaution, the bank recently overhauled its system so risk control responsibility was shared by branch heads and risk managers at its headquarters, Wang said. Previously, responsibility rested with headquarters.
"In some regions, for example in the eastern provinces of Jiangsu and Zhejiang, the economy slowed down and brought some operational difficulty to our branches there," he said. "But I believe the operation of our bank will be stable in general."
Pang Xiusheng, a vice-president of the bank, said more write-offs of bad loans were expected in the second half, while the mainland's asset securitisation, which allows lenders to sell NPL-backed debts, was not expected to involve big amounts as regulatory arrangements were not yet ripe.
As for introducing certificates of deposit, Pang said it would only apply to interbank deposits in the near future, instead of corporate or personal deposits in banks.