Risks in Personal Business Loans Begin to Surface (AI Translation)
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文｜财新周刊 武晓蒙 刘冉
By Caixin Weekly Wu Xiaomeng and Liu Ran
资产质量是商业银行经营的生命线。上市银行2024年中报披露后，市场将更多目光投向了零售贷款，部分银行个人经营贷不良率攀升引起关注。
Asset quality is the lifeline of commercial banking operations. Following the release of 2024 interim reports by listed banks, the market has turned its attention toward retail loans, with a rising non-performing loan ratio in personal business loans at some banks drawing significant attention.
个人贷款包括个人住房贷款、信用卡贷款、个人经营贷款、个人消费贷款等品种。其中，个人经营贷主要是面向个人发放的用于借款人从事合法生产经营活动（例如进货采购、支付水电气暖）所需资金周转的贷款，发放对象一般有小微企业主、个体工商户、农户等。
Personal loans include varieties such as personal housing loans, credit card loans, personal business loans, and personal consumer loans. Among them, personal business loans are primarily granted to individuals for the purpose of funding legitimate business activities (such as purchasing inventory or paying for utilities) required for working capital turnover. The typical recipients of these loans are small business owners, individual entrepreneurs, and farmers.
大中型银行的个人经营贷原本规模不大。2020年初新冠疫情暴发，严格的封控措施对实体经济产生较大冲击，在支持小微企业、个体工商户复工复产的政策号召及相对特殊的市场环境下，这一贷款品种规模快速扩张。
Personal business loans from medium and large-sized banks were initially not very substantial. At the onset of the COVID-19 pandemic in early 2020, stringent lockdown measures significantly impacted the real economy. In response to the policy calls for supporting the resumption of work and production by small and micro enterprises, as well as individual businesses, and given the relatively unique market environment, the scale of this loan category rapidly expanded.
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- Personal business loan balances have rapidly increased, doubling from 2019 to 2024, with a shift in focus due to rising non-performing loan (NPL) ratios, particularly noted in major banks like China Construction Bank and Postal Savings Bank of China.
- Digital inclusive finance models face challenges due to data fraud, prompting China Construction Bank to enhance fraud detection and integrate risk management practices.
- Regulatory measures are being adjusted, including renewed loan policies to manage risks and improve financial services for small and micro-enterprises while addressing market dynamics and housing price influences.
**Summary of Content with Paragraph Indicators**
Asset quality is crucial for commercial banking operations. Recent attention has focused on retail loans, particularly personal business loans, due to rising non-performing loan (NPL) ratios at some banks. Personal business loans are typically granted to individuals for legitimate business activities and are crucial for small business owners and individual entrepreneurs [para. 1][para. 2].
The pandemic in early 2020 triggered rapid growth in personal business loans due to policy support aimed at aiding small enterprises. By June 2024, these loans doubled from 11.35 trillion yuan to 23.8 trillion yuan. Initially, the expansion helped suppress NPL ratios, but these began rising in 2023 as portfolios grew [para. 3][para. 4]. By mid-2024, notable NPL ratios include Postal Savings Bank of China at 1.88% and China Construction Bank (CCB) at 1.57% [para. 5][para. 6]. City and rural commercial banks show varied trends in NPL ratios [para. 7].
Concerns persist over the accuracy of reported delinquency data. Factors such as external data fraud and the financial strain from falling housing prices influence risk exposure [para. 8][para. 9].
The expansion of personal business loans is notable among the 40 A-share listed banks, which account for 50% of the market [para. 10]. State-owned banks demonstrate robust growth with a compound rate of 31.1% [para. 11]. CCB leads in individual business loans, significantly increasing its scale over recent years [para. 12].
During the pandemic, banks supported affected sectors by reducing fees and offering long-term loans, acting on government recommendations [para. 13]. Personal business loans, classified by guarantees, face varying interest rates [para. 14]. CCB has developed a digital inclusive finance model that integrates data to streamline credit evaluation [para. 15]. Success is attributed to products like "Merchant Cloud Loan," leveraging digital tools to enhance growth and efficiency [para. 16][para. 17].
CCB's NPL rate for personal business loans fell until 2023, rising again due to challenges like data fraud by intermediaries [para. 18]. The digital finance model faces data manipulation risks, necessitating improved cross-verification processes [para. 19][para. 20]. Enhancements in risk management and fraud detection have been initiated [para. 21].
Despite challenges, the digital finance model remains fundamental for the future, offering critical support for small enterprises [para. 22][para. 23]. Aggressive lending practices by bank personnel have also contributed to risk exposure [para. 24].
Past misuse of property-backed loans for real estate speculation highlights risks in mortgage loans [para. 25]. Market changes have affected refinancing efforts, elevating some borrowers' risks [para. 26][para. 27]. Banks are countering risky practices with loan management measures, focusing on ensuring compliance and monitoring [para. 28].
The government's "Notice" on loan renewals aims to facilitate continued financial support and reduce risks in personal loans [para. 29][para. 30]. Loan renewal policies adapt to maintain financial services [para. 31]. Despite long-standing controversy over loan renewals under non-principal repayment rules, nuanced evaluation of small enterprises is essential [para. 32][para. 33]. Increasing pressure on risk management has slowed some banks' lending growth [para. 34].
- Postal Savings Bank of China
邮储银行 - Postal Savings Bank of China's personal business loan non-performing rate was 1.88% as of June 2024, showing a 15 basis point increase from the end of 2023. The bank is among the large banks experiencing a rise in non-performing rates for personal business loans as market conditions change.
- China Construction Bank
建设银行 - China Construction Bank has seen its personal business loan non-performing rate rise to 1.57% at the end of June 2024 due to extensive efforts in inclusive finance. The bank has been actively expanding its personal business loan portfolio, with significant growth using digital inclusive finance models such as “Merchant Cloud Loan” and “Individual Business Collateral Quick Loan.” Challenges include external data fraud risks, which the bank is addressing through model optimization and enhanced risk management.
- Industrial and Commercial Bank of China
工商银行 - As of June 2024, the Industrial and Commercial Bank of China (ICBC) has the largest personal business loan portfolio of 1.57 trillion yuan. The bank's personal business loan growth over the past four years has doubled since the end of 2019. ICBC's non-performing personal business loan rate was 0.91%, showing relative resilience. The bank's lending approach remains conservative, focusing on strict risk management and ensuring loans are used for intended purposes.
- Bank of Communications
交通银行 - As of June 2024, the Bank of Communications had a personal business loan non-performing loan (NPL) rate of 0.88%. This marked a slight increase of under 10 basis points (BP) compared to the end of 2023. Despite the rise in NPLs, the increase was relatively modest compared to some other major banks in China.
- Agricultural Bank of China
农业银行 - As of the end of June 2024, Agricultural Bank of China's personal business loan non-performing loan (NPL) rate was 0.77%, the lowest among major state-owned banks mentioned. Compared to the end of 2023, the bank experienced an increase in NPLs of less than 10 basis points. The article indicates that its exposure to non-performing personal business loans is relatively controlled.
- Bank of China
中国银行 - The article does not provide specific data about the personal business loan non-performing loan (NPL) rate for Bank of China as of June 2024. It mentions that Bank of China has not disclosed its figures regarding personal business loans.
- Shanghai Pudong Development Bank
浦发银行 - As of June 2024, Shanghai Pudong Development Bank reported a non-performing loan rate of 1.6% for personal business loans, a 9 basis point increase from the end of 2023. The bank is one of the few national joint-stock banks that disclosed data about these loans.
- Industrial Bank
兴业银行 - According to the article, Industrial Bank's individual business loan non-performing loan (NPL) rate was 0.8% as of the end of June 2024, marking a slight increase of 1 basis point compared to the end of 2023.
- Bank of Suzhou
苏州银行 - The article mentions that the Bank of Suzhou saw its personal business loan non-performing loan (NPL) rate rise by 76 basis points to 2.27% as of June 2024, compared to the end of 2023.
- Chongqing Rural Commercial Bank
重庆农商行 - Chongqing Rural Commercial Bank's non-performing rate for personal business loans decreased by 27 basis points to 1.78% as of June 2024 compared to the end of 2023. This indicates an improvement in their loan performance in that category during this period.
- End of 2019：
- The total scale of personal business loans was 11.35 trillion yuan.
- End of 2019：
- China Construction Bank’s personal business loan non-performing rate was 3.5%.
- End of 2020：
- The total scale of personal business loans rose to 13.62 trillion yuan.
- End of 2020：
- Personal business loan NPL ratios for several large and medium-sized banks significantly declined compared to the previous year.
- End of 2020：
- China Construction Bank’s personal business loan non-performing rate dropped to 0.99%.
- Before 2021：
- Credit loans accounted for about 30% of China Construction Bank's inclusive finance loan portfolio.
- 2021：
- China Construction Bank launched the 'Merchant Cloud Loan' product.
- End of 2021：
- The total scale of personal business loans reached 16.22 trillion yuan.
- End of 2021：
- China Construction Bank’s personal business loan non-performing rate dropped to 0.72%.
- End of 2022：
- The total scale of personal business loans was 18.9 trillion yuan.
- End of 2022：
- China Construction Bank’s personal business loan non-performing rate dropped to 0.65%.
- 2023：
- NPL ratios for personal business loans began to rise in several major state-owned banks.
- 2023：
- China Construction Bank faced external data fraud risks.
- End of 2023：
- The total scale of personal business loans climbed to 22.15 trillion yuan.
- First half of 2024：
- China Construction Bank’s personal business loan non-performing rate increased to 1.57%.
- As of the end of June 2024：
- The balance of personal business loans was 23.8 trillion yuan.
- As of the end of June 2024：
- NPL ratios for large banks' personal business loans were disclosed.
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