Non-performing loans at China’s listed banks surged in 2019 providing indications of the even greater balance sheet damages to follow from the coronavirus pandemic.
Non-performing loans (NPL) at China’s 24 listed municipal and rural commercial banks surged more than 20.3 percent year-on-year in 2019 to reach 99 billion yuan ($14 billion), according to a recent report by PwC. The report highlighted that NPLs were primarily driven by banks in northeastern China as well as Beijing and Tianjin.
«Against the backdrop of strengthened [government] efforts, rising [NPL ratios[ indicate that some municipal and rural commercial banks are under greater pressure to deal with bad loans,» said Shirley Yeung, a financial services partner at PwC.
M&A
Meanwhile, regulators have also signaled a shift in financial support from bad loans coverage at small and mid-sized banks to credit for small and micro-sized businesses. Initiatives underway include a 20 percent reduction in bad loan coverage in phases as well as drafted plans to restructure smaller lenders through mostly «market-oriented» means.
According to the China Banking and Insurance Regulatory Commission (CBRIC), NPL ratios claimed to 2.04 percent as of March-end, up 0.06 percent from December-end. CBIRC chief risk officer Xiao Yuanqi recently added that NPL ratios are expected to continue increasing in the second quarter but stressed that overall risks would remain under control.
