Bad Loans at Chinese Banks Are Likely to Balloon Even After Covid-19, Association Says
Xu Wei
DATE:  Aug 03 2020
/ SOURCE:  Yicai
Bad Loans at Chinese Banks Are Likely to Balloon Even After Covid-19, Association Says Bad Loans at Chinese Banks Are Likely to Balloon Even After Covid-19, Association Says

(Yicai Global) Aug. 3 -- Chinese lenders' ratio of bad loans has increased during the Covid-19 pandemic and is expected to keep on rising, according to an industry association.

Amid macropolicy support during the economic downturn, there may be a delay until the risks start to show in the financial sector, Beijing Business Daily reported, citing a report released by the China Banking Association on July 31.

By the end of June, Chinese banks' balance of non-performing loans widened by CNY400.4 billion (USD57.4 billion) to CNY3.6 trillion (USD516.3 billion) from the beginning of this year, according to the CBA. The ratio rose to 2.1 percent from 2.02 percent.

Lenders' loan loss provision coverage ratio was 178.1 percent, falling 4 percentage points from the beginning of the year, meaning that they were less prepared to overcome future losses. But at the same time, their collective domestic assets widened by 9.8 percent to CNY301.5 trillion. Some CNY2.42 trillion worth of new yuan loans were added to reach CNY12.09 trillion (USD1.73 trillion).

Banks should hike their loss provisions and enhance risk prevention in key areas such as shadow banking and illegal lending to the real estate sector while avoiding excessive expansion, the report suggested.

Chinese financial institutions, including commercial banks, are vigorously promoting innovation to serve the country's startups amid the intensifying competition with the US regarding core technologies, based on the report.

Editor: Emmi Laine

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Keywords:   China Banking Association,Bank,NPL