(Yicai Global) March 12 -- Impaired loans at Dalian Rural Commercial Bank ballooned after farming and marine businesses were hit hard last year by African swine fever and the failure of sea cucumber crops.
Dalian Rural's non-performing loans ratio reached 9.95 percent at the end of last year, the lender said yesterday in its 2019 Negotiable Certificate of Deposit Issuance Plan. The NPL ratio for all commercial banks at the end of 2018 stood at 1.83 percent, according to data released last month by China's top banking regulator.
Based in the port city of Dalian in northeastern Liaoning province, the bank had CNY340 million (USD51 million) new NPLs because of last year's seafood and hog crisis. Sea cucumbers in Dalian died from continuous hot weather and the swine fever epidemic severely impacted pig farming.
The bank said agricultural borrowers sit at the end of the farming, forestry, animal husbandry and fishery chains and use simple production technologies, so they are vulnerable to natural disasters and have little protection against risk. That led to the increase in dud loans among such borrowers, it added.
Normally cool, Dalian sweated through 14 straight days with record maximum temperatures of over 30 degrees centigrade last summer, which caused mass die-offs of farmed sea cucumbers and other seafood species, the bank said, adding pig farming in some parts of the urban area also took a hit from swine fever in the fall and the rate of animals sold for slaughter dropped to zero last year.
The bank's outstanding farm-related loans were CNY33.7 billion (USD5 billion) in late September, making up 62 percent of all lending, while the NPL balance was CNY5.4 billion, of which CNY3.7 billion was agriculture related, or 69 percent of all impaired loans, data show, per which the agricultural NPL ratio stood at 6.85 percent and the non-agriculture-related rate was 3.1 percent.
As of September, the bank's bad loan ratio jumped 5 percentage points from 4.95 percent early last year, and the reserve adequacy ratio was 56 percent, slumping almost 48 points from 104 percent at the start of last year -- far less than the 120 percent regulatory demand, per data.
The China Banking and Insurance Regulatory Commission's Dalian Office has sanctioned Dalian Rural Commercial Bank four times over its poor loan management this year. The bank was penalized for its loose controls over actual use of loans and deficient post-loan management, which allowed new loans to be used to repay previous loan interest to cover credit risks, and because of its low awareness of payment compliance and false reporting of overdue loans.
The bank was formed from the former Dalian Rural Credit Cooperative Union and its eight county-level units in 2012. The lender, which now has 330 branches and registered capital of CNY5 billion, covers most areas surrounding the city.
Editor: Ben Armour