China’s biggest four banks have been hit by a more than 50% increase in overdue loans from the property sector over the past year, as the real estate market’s liquidity crunch spills into the financial sector, reports the Financial Times. China’s top lenders—the Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China and Bank of China—last week reported combined overdue property loans of RMB 136.6 billion ($20 billion) at the end of June, up from RMB 90 billion at the same time last year.
The rise in bad loans from the deteriorating property crisis is worsening asset quality across China’s RMB 367.7 trillion banking industry. Beyond bad debts, the banks are also suffering from weakening loan demand from their best corporate and retail clients as growth slows in the world’s second-biggest economy.
“We see multiyear structural [return on equity] decline as banks retreat from the property sector amid stalled projects, mortgage boycotts and heightened regulations,” Macquarie analyst Dexter Hsu wrote in a note to clients.