All four big Chinese banks report rising bad loans

By: | Published: August 30, 2016 7:33 PM

All of China's "Big Four" state-owned banks reported mounting bad loans in the first half of the year, statements showed, as the world's second-largest economy faces souring debt amid slowing growth.

The Industrial and Commercial Bank of China, the world's biggest lender by assets, said its non-performing loan (NPL) ratio rose to 1.55 per cent at the end of June, up from 1.50 percent at the end of last year, according to a statement to the Hong Kong stock exchange filed today. REUTERS/China DailyThe Industrial and Commercial Bank of China, the world’s biggest lender by assets, said its non-performing loan (NPL) ratio rose to 1.55 per cent at the end of June, up from 1.50 percent at the end of last year, according to a statement to the Hong Kong stock exchange filed today. REUTERS/China Daily

All of China’s “Big Four” state-owned banks reported mounting bad loans in the first half of the year, statements showed, as the world’s second-largest economy faces souring debt amid slowing growth.

The Industrial and Commercial Bank of China, the world’s biggest lender by assets, said its non-performing loan (NPL) ratio rose to 1.55 per cent at the end of June, up from 1.50 percent at the end of last year, according to a statement to the Hong Kong stock exchange filed today.

Even so its net profit for the first six months edged up 0.8 per cent year-on-year to 150.66 billion yuan (USD 22.6 billion), it said.

China’s three other giant state-owned banks have reported similar results in recent days, with all of their bad loan ratios creeping upwards as Beijing seeks to boost the world’s second-largest economy with an infusion of cheap credit.

Analysts have warned that a debt-fuelled rebound might be short-lived and ballooning borrowings risk sparking a financial crisis as bad loans and bond defaults increase.

Bank of China’s earnings statement Tuesday showed its NPL ratio rising to 1.47 at the end of June, up from 1.43 in December.

Last week the country’s number two lender, the China Construction Bank,reported its NPL ratio had risen 0.05 percentage points to 1.63 per cent, while the Agricultural Bank of China reported a figure of 2.40 per cent, slightly higher than last year.

China’s total debt hit 168.48 trillion yuan at the end of last year, equivalent to 249 per cent of national GDP, top government think tank the China Academy of Social Sciences has estimated.

Authorities have unveiled a set of policies intended to tackle the problem of souring loans, including debt-for-equity swaps. But some analysts fear this would simply extend life support to debt-saddled “zombie” companies that are weighing down the economy.

Earlier this summer an official with China’s banking regulator said that Chinese banks had written off more than USD 300 billion of bad loans in the past three years.

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