Chinese banks must brace for surge in bad loans, regulator says
July 13, 2020
China’s banks should brace for a big jump in bad loans due to coronavirus-induced economic pain, the financial regulator said on Saturday, noting the deterioration of asset quality at some small and mid-sized financial institutions was accelerating, reported Reuters.
China’s Banking and Insurance Regulatory Commission said in a statement that profit growth would slow sharply at some banks while others could see profits decline.
If banks were to make the minimum amount of provisions for their non-performing loans, which some have yet to do, profits for the sector would fall by more than RMB 350 billion ($50 billion), the statement said.
Outstanding non-performing loans in the sector totaled RMB 3.6 trillion as of end-June, while the bad loan ratio rose to 2.10%, 0.08 percentage points higher than the beginning of the year, the statement said.