Earnings reports released Thursday showed that China’s largest banks have begun cutting back on loans made to local governments, the Wall Street Journal reported. Both Industrial and Commercial Bank of China (ICBC; 601398.SH, 1398.HK) and Bank of China (BoC; 601988.SH, 3988.HK) reported a 27% year-on-year increase in first-half net profit to US$12.44 billion and US$7.65 billion respectively. BoC also reported that its lending to local governments fell by US$676 million since December, even while its overall loan portfolio grew by 9.8%. Similarly, China Construction Bank (CCB; 601939.SH, 0939.HK) said that its lending to local governments fell by 11% since December. China’s large banks argue that their overall performance is healthy: The total non-performing loan ratio at ICBC and BoC fell to 1.26% and 1.2%, respectively, and the rate for local government projects specifically was just 0.02% and 0.07%.
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