Bank of China’s New Boss Seeks to Allay Concerns Over Rise in Lender’s Dud Loans
Du Chuan
DATE:  Mar 31 2021
/ SOURCE:  Yicai
Bank of China’s New Boss Seeks to Allay Concerns Over Rise in Lender’s Dud Loans Bank of China’s New Boss Seeks to Allay Concerns Over Rise in Lender’s Dud Loans

(Yicai Global) March 31 -- The incoming president of Bank of China has sought to dispel concerns about an increase in non-performing loans at the lender by saying fluctuations in bad loan levels are no cause for worry so long as they are within a reasonable range.

China’s banking sector had unstable asset quality last year amid the pandemic and at year’s close Bank of China’s bad loans totaled CNY207.3 billion (USD31.6 billion), an increase of CNY29 billion from a year earlier, with the NPL ratio up 0.09 percentage point on the year to 1.46 percent.

But at the end of the fourth quarter, the Beijing-based bank’s bad loans and NPL ratio had fallen from the previous quarter.

“Some of the risk control measures implemented in 2020's second half have started to take effect, with continuous improvement in asset quality and a trend of significant decline in both bad loans and the NPL ratio,” Liu Jin said at its earnings conference yesterday.

The bank has also stepped up its efforts to dispose of bad assets in the current quarter, he added.

The government recently announced its decision to extend the policy of allowing small and micro-sized businesses to delay repayment of principle and interest till the end of this year, offering banks an opportunity to mitigate risks.

Risks Remain

But Liu said mitigation does not amount to risk elimination. “Some of the small and micro-sized firms enjoying the favorable policy may still be unwilling or unable to pay by the extended deadlines,” he said. “So we still face risks from these loans” and will “make preparations and respond effectively.”

Another factor is uncertainty from the third wave of Covid-19 sweeping through some European countries, and among Chinese lenders Bank of China has a relatively large amount of overseas credit assets. 

“Bank of China's new domestic bad loans are mostly in manufacturing, real estate and the wholesale and retail sectors, while the new bad loans overseas are mostly in oil and gas, aviation and real estate,” according to incoming Vice President Chen Huaiyu. 

Chen acknowledged the pressure in overseas credit risk management, but said the bank does not expect a sharp rise in NPLs. Credit risks “are generally under control,” he said.

Bank of China’s assets had climbed 7.17 percent to CNY24.4 trillion (USD3.7 trillion) as the end of last year. Operating income rose 3.2 percent to CNY565.5 billion, while net profit gained 2.9 percent to CNY192.9 billion.

The lender announced Liu’s and Chen’s appointments on March 16. They are still subject to regulatory approval. Liu, 54, worked for many years at Industrial and Commercial Bank of China and China Development Bank and served as China Everbright Bank's president from January 2020. 

Editors: Liao Shumin, Tom Litting

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Keywords:   Bank of China