Second-quarter asset quality loses its value

The asset quality of Chinese lenders deteriorated further in the second quarter as the economy slowed, data from the China Banking Regulatory Commission and the interim results of listed banks show.

Domestic banks' non-performing loans rose by 13 billion yuan ($2.12 billion) from April to June, the seventh consecutive quarterly increase, the CBRC said in an online statement on Wednesday.

All Chinese banks, including State-owned lenders, joint stock banks and urban and rural banks, reported an increase in their non-performing loans, which stood at 539.5 billion yuan at the end of June. Such loans have increased for seven consecutive quarters. [GENG GUOQING / FOR CHINA DAILY]

Total NPLs stood at 539.5 billion yuan at the end of June, with increases across all categories of banks — State-owned lenders, joint stock banks and urban and rural banks.

The seven-quarter streak of increases was the longest in at least nine years, according to data compiled by Bloomberg News.

The overall deterioration in loan quality was also reflected in the initial first-half results of China's listed banks. As of Wednesday, three of 16 listed commercial lenders had released their interim results.

Bad loans at the Shanghai Pudong Development Bank Co Ltd rose 2.3 billion yuan half-on-half. The ratio of such loans to total outstanding loans was 0.67 percent as of June, up 0.09 of a percentage point, said the lender on Tuesday.

Beijing-based Hua Xia Bank Co Ltd also experienced declining asset quality. Its NPLs went up by 726 million yuan in the first half.

Its NPL ratio rose 0.03 of a percentage point to 0.91 percent. In East China, the ratio reached 1.46 percent, it said.

Soured loans of Industrial Bank Co increased 2.3 billion yuan to 7.6 billion yuan in the first half. Overdue loans, an indicator of future NPLs, surged by 4.5 billion yuan to 7.7 billion yuan.

Its NPL ratio rose 0.14 percentage point to 0.57 percent.

Guo Tianyong, director of the Research Center of the Chinese Banking Industry at the Central University of Finance and Economics in Beijing, said the rise in NPLs was a natural result of the economic slowdown.

The China Business News on Wednesday reported that as of June 30, outstanding bad loans in the eastern provinces of Zhejiang, Jiangsu and Shandong totaled 247.1 billion yuan, accounting for 45 percent of bad loans nationwide.

Jimmy Leung, PricewaterhouseCoopers' banking and capital markets leader for China, said earlier that banks should now write off more bad loans using their profits.

But bank profitability had declined because of the domestic economic slowdown and government moves to liberalize interest rates and curb credit expansion.

The China Banking Association previously forecast that domestic banks' net-profit growth rate would drop by about 8 percentage points this year from last year's 18.9 percent.

Industrial Bank's interim results showed its profit growth of 27 percent was far below the 40 percent average pace during the same period of the past three years.

The half-year profit growth rate of Hua Xia Bank was 20 percent, compared with 42 percent in the first half of 2012.