China state banks report surge in soured loans

By Dow Jones

Economists worried that China may miss the 7. 5% annual growth target set by the government this year if the situation doesn't show significant improvement in coming months. "Asset quality of Chinese banks is still under downward pressure and we haven't seen when it could bottom out," said Standard & Poor's bank analyst Liao Qiang. "It is very likely that the deterioration could accelerate in the future.

The five biggest state-owned banks- Industrial & Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China and Bank of Communications-wrote off and transferred out their books a total of 46. 91 billion yuan ($7. 57 billion) bad loans in the first half of the year, according to calculations by The Wall Street Journal.

In the first half of the year, the top five banks reported a total of 509. 29 billion yuan in net profit, up 9% from same period last year but down substantially from their regular 20% growth rate during China's boom years.

Banks said they saw rising nonperforming loans from steel trade, manufacturing sector as well as small businesses that have been hit most by China's slowing economic growth and the government's efforts to resolve overcapacity problems. "Banks are expected to step up write-offs in the following months given a spike in nonperforming loans and the government's easing of the rules.

China's biggest state-owned banks reported a surge in soured and castoff loans in the first half of the year as China's slowing growth takes an increasing toll on its lenders.

The bad banks, formally called asset-management companies, include China Cinda Asset Management Co. , which listed its shares in Hong Kong last year, still play their role to resolve soured loans.

Read more here: Business Spectator


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