Chinese banks' asset quality remains under pressure
Bad loans at mainland banks likely to rise further amid slowdown in economic growth
Mainland banks' asset quality will stay under pressure in 2014 as the amount of bad loans rose in the fourth quarter of last year, the ninth consecutive quarterly increase, and it is expected to grow further due to the burden imposed by a slowing economy.
Non-performing loans at mainland banks jumped 28.5 billion yuan (HK$36.2 billion) in the quarter to 592.1 billion yuan, the highest level since September 2008, the China Banking Regulatory Commission said on Thursday.
The bad-loan ratio increased to 1 per cent at the end of December, the loftiest mark since the end of 2011. The figure stood at 0.97 per cent three months ago.
"The ratio is expected to further rise to 1.2 to 1.3 per cent at the end of this year," said Shen Jianguang, Mizuho Securities' Greater China chief economist. He took note of credit risks in industries such as shipbuilding and steel manufacturing, which face overcapacity problems.
Given the slower pace of economic growth and looming overcapacity in various industries, banks' asset quality would see increasing pressure, Shen said.
Mainland growth slowed to 7.7 per cent in the fourth quarter from 7.8 per cent in the third. Growth for this year was forecast at 7.4 per cent, a Bloomberg survey showed.