US ratings firm Standard & Poor’s lowered its estimates of impaired assets at China’s banks to 44-45% of total loans from almost 50%, and the average recovery rate on impaired assets in China to 20% from 15% because of a rapid increase in loans.
Total outstanding loans jumped by 23.6% year-on-year to RMB 16.73 trillion (US$2 trillion) at the end of October, as banks stepped up lending operations on the back of feverish economic activity. The non-performing loan (NPL) ratio of China’s four State-owned commercial banks – the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of China and the China Construction Bank (CBC) – stood at 21.4%, according to official statistics.
The CBC posted the lowest NPL ratio with just 11.84% at the end of October, down four percentage points from the beginning of 2003, according to bank sources. The bank is considering a JV with Morgan Stanley to dispose of some RMB 4.3 billion (US$524 million) of NPLs and recover at least 30% of the figure’s face value.