BEIJING, Nov 7 (Reuters) – China’s top banks may see their
bad loan ratios triple in size by the end of 2012 as the effects
of economic slowdown are felt, likely spurring the repackaging
and sale of impaired assets, the official Financial News said on
Wednesday.
The paper, run by China’s central bank, cited a report by
Orient Asset Management Corp – one of four firms charged with
cleaning up bad debts at China’s banks – which said bad debts
could soar in the steel, ship building and solar sectors as well
as among exporters, local governments and property developers.
“China’s outstanding non-performing loans (NPLs) as well as
the average NPL ratio are likely to rise,” the newspaper said,
citing the report.
The risk of a rise in bad loans comes as banks face pressure
to increase capital under stricter international banking rules
and raises the urgency of NPL disposal, the report said.
In the Orient survey of Chinese bankers, some 69.4 percent
believed the average NPL ratio for Chinese banks – now just
under 1 percent – could rise to 1-2 percent by the end of 2012
while 20.6 percent believed it could climb to 2-3 percent.
A total of 53.6 percent of respondents believed China’s
total NPLs would rise by less than 10 percent in 2012, while
28.7 percent of them believed the rise could be 10-20 percent.
Many analysts suspect the real NPL ratio for Chinese banks
could be higher than the official 0.97 percent rate, especially
given the sharp slowdown in the economy this year.
The NPL ratio in China’s entrepreneurial hub of Wenzhou has
more than doubled to 3 percent this year, according to state
media reports.
China’s annual GDP growth in the third quarter of 2012 was
its slowest since the first quarter of 2009, with the 7.4
percent expansion below the government’s target of 7.5 percent
and well short of 2011’s full year growth of 9.2 percent.
Economists polled by Reuters expect China’s growth in 2012
to be its slowest since 1999 – the year Beijing set up Huarong,
Cinda, Great Wall Asset Management Corp, and Orient to take over
1.4 trillion worth of non-performing loans from its state-owned
banks in preparation for their stock market listings.
China’s top five banks – Industrial and Commercial Bank of
China Bank of China, China Construction Bank
and Agricultural Bank of China and Bank of
Communications – could all roll out NPL sales.
The size of each NPL sale could between 1-5 billion yuan
($160-$800 million), the report said.
Chinese banks stopped large-scale bad loan sales after 2006
and the existing bad loans at AMCs are drying up after years of
debt resolution, the newspaper said.
Golman Sachs and Morgan Stanley have been
among foreign banks actively buying Chinese distressed assets.
