Chinese Banks Lent More to Small Firms This Year With Rising Bad Loans
Tang Shihua
DATE:  Aug 11 2020
/ SOURCE:  Yicai
Chinese Banks Lent More to Small Firms This Year With Rising Bad Loans Chinese Banks Lent More to Small Firms This Year With Rising Bad Loans

(Yicai Global) Aug. 11 -- Chinese lenders have increased their lending to small and micro enterprises this year as encouraged by the government while their ratios of bad loans have been widening, based on data from the banking and insurance regulator.

The balance of loans to small and micro enterprises rose to CNY40.7 trillion (USD5.9 trillion) from CNY36.9 trillion by the end of June from the beginning of this year, the China Banking and Insurance Regulatory Commission said in a recent report.

The balance of inclusive loans to such small businesses with CNY10 million (USD1.4 million) or less in credit widened by nearly 18 percent to CNY13.7 trillion.

However, commercial banks logged more bad loans in tandem with increasingly inclusive financing.

Their balance of non-performing loans increased by CNY124.3 billion to CNY2.74 trillion (down by USD17.9 billion to USD393.9 billion) in the second quarter from a quarter earlier. Their NPL ratio rose to 1.94 percent from 1.91 percent.

Commercial banks had a loan balance of CNY138 trillion by the end of June, with CNY3.9 trillion worth of special-mention loans, meaning potentially risky lending.

The Covid-19 pandemic made a dent in financial institutions' balance sheets. In the first half of the year, commercial banks' net profits slid 9.4 percent to CNY1 trillion from a year ago. The average return on assets fell to 0.83 percent from the previous quarter's 0.98 percent.

By the end of June, Chinese commercial banks' core tier 1 capital adequacy ratio had narrowed to 10.47 percent from 10.88 percent from the end of March. Their tier 1 capital adequacy ratio was 11.61 percent, down from 11.95 percent. The capital adequacy ratio was 14.21 percent, sliding from 14.52 percent.

Editor: Emmi Laine

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Keywords:   Bank,CBIRC,NPL,Bad Loans,Inclusive Loans