Big Chinese Banks See Bad Debt Ratio Rebound Despite Slowing Mortgage Issuance
Qi Ning
DATE:  Sep 02 2022
/ SOURCE:  Yicai
Big Chinese Banks See Bad Debt Ratio Rebound Despite Slowing Mortgage Issuance Big Chinese Banks See Bad Debt Ratio Rebound Despite Slowing Mortgage Issuance

(Yicai Global) Sept. 2 -- According to the first-half earnings results of six of China’s largest state-owned banks, mortgage issuance slowed and their exposure to risk in the property sector fell below the mandated safety line, though their non-performing loan ratio in the sector rebounded.

Mortgage issuance generally slowed in the six months ended June 30, with the proportion of industry loan balance and personal mortgage loan balance generally dropping below the regulatory safety level, Yicai Global found.

Three reasons were cited in the lenders’ financial statements: active risk control by the banks; the impact of the Covid-19 pandemic; and the decline in the real estate sector’s demand for credit.

As of the end of June, property loans at the six banks totaled CNY3.72 trillion (USD540 billion), an increase of CNY208.2 billion (USD30.17 billion) from CNY3.51 trillion at the end of last year. Personal housing loans rose about CNY448 billion from CNY26.48 trillion (USD3.84 trillion) to CNY26.92 trillion.

Among the lenders, Agricultural Bank of China had the largest loan balance for developers, some CNY843 billion. China Construction Bank ranked second with CNY763 billion, and Postal Savings Bank of China had the least at CNY179 billion.

The balance of real estate loans of all six banks accounted for less than the required maximum of 40 percent of their total loans. Bank of Communications had the highest, at 6.97 percent.

ABC and the CCB remained the top two for real estate loan balance, with Bank of China surpassing Industrial and Commercial Bank of China to come third because of its relatively larger net amount of real estate loans during the period.

The net amount of new property loans issued by BoCom and PSB, two relatively small banks, jumped 28 percent and 17.7 percent, respectively, from the end of last year. The net loan growth rates of the other four banks were below 10 percent.

Slowing Home Loan Issuance

On the other hand, although the six banks’ balance of personal mortgage loans at the end of the period rose from the end of the previous year, the proportions of their personal mortgage loans declined from the end of last year, indicating that the growth rate of personal mortgage issuance is also slowing.

Among them, the balance of personal mortgages at CCB and PSB fell to 31.8 percent and 31.9 percent, respectively, which were just below the ceiling of 32.5 percent set by the regulator. At the end of last year, the two banks were still above the red line.

But despite the slowdown in loan issuance, the NPL ratios of real estate loans of the six banks at the end of the first half rebounded from the end of last year, and the proportions of non-performing personal mortgage loans also surged, except at ABC, where it remained flat.

BoC’s real estate bad loans ratio at the end of the period reached 5.67 percent, or CNY41.68 billion (USD6.03 billion) -- both figures were the highest among the six lenders. The second and the third highest were ICBC and ABC. PSB had the lowest NPL balance as well as the lowest amount, at CNY1.79 billion (USD260 million) and 1.01 percent, respectively.

But unlike the other five banks whose balance of dud loans to firms was significantly higher than personal mortgage loans, PSB’s non-performing balance of personal mortgages was as high as CNY11.64 billion, far exceeding its non-performing balance of CNY1.79 billion for developers. It also had a bad loan ratio of 0.52 percent of mortgages to individuals, also the highest among the six banks.

In response to the previous storm of unfinished projects and the risk exposure at banks, the executives of the six lenders responded at their respective interim results briefings that the risk was still controllable due to the relatively limited amount of mortgage loan balances involved in the relevant shutdown projects.

Editors: Tang Shihua, Peter Thomas

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Keywords:   Business Data,Property Loan,Mortgage,Non-Performing Loan,Risk Exposure,Bank,Industry Analysis