Bloomberg News

Chinese Banks’ Bad Loans Rise in Fourth Quarter as Economy Slows

February 17, 2012

Feb. 17 (Bloomberg) -- Chinese commercial banks’ bad loans increased in the fourth quarter of last year, highlighting pressures the lenders face in maintaining asset quality as the economy slows.

Non-performing loans rose 20.1 billion yuan ($3.2 billion) to 427.9 billion yuan as of Dec. 31, the China Banking Regulatory Commission said in a report on its website today. Bad loans accounted for 0.96 percent of total lending, up from 0.95 percent in September and 0.17 percentage point lower than a year earlier.

Chinese banks are struggling to keep bad loans in check as the country’s economic expansion slows and the housing market cools under government curbs. Lenders’ non-performing loan ratio had not increased quarter-on-quarter since the end of 2005, according to data compiled by Bloomberg.

“This is somewhat negative news because investors are not yet expecting an industry-wide rebound” in soured loans, May Yan, a Hong Kong-based analyst at Barclays Capital Inc., said by phone. “Banks this year face pressures from bad loans, particularly from developers and small businesses.”

Combined net income jumped 36.3 percent to 1.04 trillion yuan as credit growth boosted interest income, according to the regulator’s report.

Commercial lenders’ average return on equity climbed 1.18 percentage points from a year earlier to 20.4 percent in 2011, the regulator said.

--Editors: Nathaniel Espino, John Liu

To contact the reporter on this story: Bloomberg News in Beijing at dzhang14@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net


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