Jun 25, 2012 07:14 PM

Banking Sector Sees Rise in Bad Loans

(Wenzhou) – The amount and ratio of non-performing loans (NPLs) in the banking sector are increasing after steadily dropping for years as major state-owned banks finished share ownership reform and went public in the early 2000s.

By late 2011, the NPL ratio for the entire banking industry stood at less than 1 percent, and while there was general agreement the figure could rise, analysts thought the change would unfold slowly.

However, it is already taking place in Wenzhou, in the eastern province of Zhejiang. The city frequently made headlines last year because private financing went off the rails as credit tightened and speculative property sales slumped.

"When Premier Wen Jiabao paid a visit to Wenzhou last August, the city's non-performing loan ratio in the banking sector was only 0.37 percent, the lowest in the nation," an official with China Banking Regulatory Commission's Zhejiang office said. "Now it has risen to nearly 2 percent."

By April, the amount and rate of NPLs at the province's state-owned banks had grown, several sources in banking industry said.

Leading the uptick was China Construction Bank's provincial branch. The bank saw its NPL ratio rise to 2 percent and the total amount of outstanding NPLs reached 10 billion yuan, an official from the bank said.

The local branches of large, joint-stock commercial banks were hit as well.

The NPL ratio of China Guangfa Bank in Zhejiang rose to 2.89 percent, up by more than 1 percentage point from the end of last year, the banking regulator said.

Shenzhen Development Bank also saw its ratio nearly double to 2 percent, the data shows.

In general, the NPL ratio in the Zhejiang banking industry had risen by at least 0.5 percentage points by May from 0.93 percent early in the year, an official with the Zhejiang branch of Industrial and Commercial Bank of China said.

"Zhejiang could be a prelude," he said, "We're concerned that this would spread to the eastern region as a whole, followed by central and western regions."

You've accessed an article available only to subscribers
Share this article
Open WeChat and scan the QR code