Chinese banks’ bad loan ratio unchanged at 1.74pc, though risks remain under deleveraging drive

PUBLISHED : Monday, 14 August, 2017, 9:58pm
UPDATED : Monday, 14 August, 2017, 9:58pm

The average non-performing loan (NPL) ratio at mainland Chinese banks remained unchanged at the end of June, stabilising for two straight quarters, the latest regulatory data showed on Monday.

However, the indicator of the quality of banking assets could inch up later this year as the central government’s ongoing drive to trim financial leverage could lead to exposure of bad loans, analysts cautioned.

The NPL ratio for commercial lenders was at 1.74 per cent at the end of June, the same level seen at the end of the first quarter and the end of last year, according to data from the China Banking Regulatory Commission (CBRC). It was down from a recent high of 1.76 per cent seen at the end of the third quarter of last year.

A non-performing loan is borrowed money upon which the debtor has not made a scheduled payments for at least 90 days.

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Total bad loans rose to 1.64 trillion yuan (US$246 billion), up from 1.58 trillion yuan at the end of March. Special mention loans, potentially weak loans or assets presenting unwarranted credit risks, inched down to 3.4 trillion yuan from 3.42 trillion yuan at the end of March.

“The data reflected that banking asset quality is under control,” said Zhao Yarui, a senior researcher at Bank of Communications. “Yet, credit risks still remain given the still relatively large scale of bad loans and special mention loans.”

The NPL ratio is likely to grow to 1.8 per cent by the end of this year if economic growth falls short of expectations, and if exposure to bad assets rises as the financial deleveraging drive continues, she said.