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Rising bad loan ratio to hit bank profits
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A rising bad loan ratio is expected to cause some Chinese banks to post zero growth in profits or even negative growth in the second half of this year or in 2016, PricewaterhouseCoopers said yesterday.
“The banking industry in China is facing three turning points at present — profit growth declines, interest margin narrows and most importantly asset quality is under growing pressure,” said Raymond Yung, financial service leader of PwC China.
The overall bad loan ratio of the 21 Chinese mainland and Hong Kong-listed banks was 1.44 percent at the end of June, up 0.23 percentage points from December. Their total non-performing loans jumped 27.1 percent to 857.9 billion yuan (US$134 billion) in the same period, according to PwC.
Zhou Zhang, a financial services partner at PwC China, said most bad loans were due to weak performing small and medium companies in the Yangtze River Delta amid an economic downturn.
He added that there is a high possibility for bad loans to spread to the Bohai Rim, inner and western regions in the second half of 2015.
The banking sector is also facing a rising amount of loans that were past due but not impaired by the banks, and this was 50 percent higher than the figure in the first six months of 2014, the report said.
“This signals growing concerns over bad loans and asset quality, especially for joint-stock banks,” Yung said.
He urged the industry to allow more financial institutions and individuals to trade non-performing assets.
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