Caixin Weekly | The Rising Non-performing Rate Behind Personal Business Loans (AI Translation)
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文｜财新周刊 武晓蒙 刘冉
By Caixin Weekly's Wu Xiaomeng and Liu Ran
文｜财新周刊 武晓蒙 刘冉
By Caixin Weekly's 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 disclosure of the 2024 interim reports by listed banks, the market has turned more of its attention to retail loans, with the rising non-performing loan ratios in personal business loans at some banks catching the eye.
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 encompass various types, including personal housing loans, credit card loans, personal business loans, and personal consumption loans. Among these, personal business loans are primarily offered to individuals requiring revolving capital to engage in lawful production and business activities, such as purchasing inventory or paying for utilities. Typically, the recipients of these loans include small and micro-business owners, sole proprietors, and farmers.
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- Following the pandemic, the scale of personal business loans in China significantly increased, reaching 23.8 trillion yuan by mid-2024. Despite expansion, non-performing loan ratios have risen at several large banks.
- China Construction Bank's aggressive approach to inclusive finance led to increased risk exposure, with NPL ratios rising to 1.57% by mid-2024, a notable increase from previous years.
- Challenges include data fraud risks and misuse of business loans for real estate, prompting banks to enhance risk management and fraud prevention measures.
The asset quality in commercial banking, especially focusing on retail loans, is gaining attention due to rising non-performing loan (NPL) ratios in personal business loans, a subcategory that includes loans for individual entrepreneurs, small businesses, and farmers typically used to fund business activities like inventory purchases. This subcategory's scale was not initially large in medium and large banks but saw rapid expansion post-COVID-19 due to policy push to support smaller businesses; its value rose from 11.35 trillion yuan in 2019 to 23.8 trillion by mid-2024, with most growth stemming from medium to large banks [para. 1].
However, this rapid expansion diluted NPL ratios temporarily, causing them to decline at some major banks by the end of 2020. But by 2023, while these loans kept growing, their NPL ratios also rose, with figures at significant banks such as the Postal Savings Bank of China and China Construction Bank increasing to 1.88% and 1.57%, respectively, by mid-2024 [para. 5].
Despite the expansion, discrepancies among banks exist: for instance, personal business loan NPL rates at national joint-stock commercial banks like Shanghai Pudong Development Bank showed a modest increase, while city and rural banks displayed significant individual differences [para. 7]. Moreover, existing data might not fully capture current risks, as factors like economic conditions and data fraud risks in credit loans are at play [para. 9].
In light of growth statistics from 40 A-share listed banks, personal business loans make up 50% of the market, with state-owned banks holding the majority. However, concerns like external data fraud, exemplified by schemes like creating shell companies for loan applications, present challenges to these digital finance models [para. 11][para. 23]. Despite digital models improving some assessment processes, the shift in housing market dynamics has also highlighted further risk exposure in mortgage-backed loans, previously exploited for speculative purposes [para. 25].
Looking forward, amendments allow the renewal of loans without requiring repayment of principal provide some alleviation, reflecting measures suggested for enhancing financial services for small enterprises [para. 29]. However, the complete scaling of risk remains a subject of debate, considering the blurred picture of asset quality and cautious loan renewal practices [para. 31].
Overall, while personal business loans have vital growth backed by market conditions and policy interventions, the underlying risk exposures related to NPL ratios and data management require strategic response from both banks and regulatory bodies to ensure financial stability and sustainable business support [para. 11][para. 25].
- Shanghai Pudong Development Bank
- As of June 2024, Shanghai Pudong Development Bank reported a personal business loan non-performing loan (NPL) rate of 1.6%, reflecting an increase of 9 basis points from the end of 2023.
- Industrial Bank
- Industrial Bank's personal business loan non-performing rate was 0.8% as of June 2024, showing a slight increase of 1 basis point from the end of 2023.
- Bank of Suzhou
- As of June 2024, Bank of Suzhou's personal business loan non-performing loan (NPL) rate increased by 76 basis points from the end of 2023, reaching 2.27%. This indicates a significant rise in loan defaults, contrasting with other city/rural commercial banks, which have shown varied trends in NPL rates, with some experiencing decreases.
- Chongqing Rural Commercial Bank
- Chongqing Rural Commercial Bank's personal business loan non-performing rate decreased by 27 basis points (BP) to 1.78% as of the end of June 2024 compared to the end of 2023.
- Zhongtai Securities
- The article mentions Zhongtai Securities' banking analysis team, led by Dai Zhifeng, providing statistics on personal business loans. As of the end of June 2024, 40 A-share listed banks disclosed their personal business loan data, totaling 11.8 trillion yuan and accounting for 50% of the total market personal business loan scale.
- Industrial and Commercial Bank of China
- Industrial and Commercial Bank of China (ICBC) has the largest personal business loan scale at 1.57 trillion RMB, making up 18% of its personal loan portfolio. Since 2020, ICBC's personal business loans have grown twofold. Though its credit control is strict, regional disparities in housing prices have affected loan delinquency rates, with more significant issues in areas with steep property price declines.
- China Construction Bank
- China Construction Bank (CCB) has aggressively expanded personal business loans since 2021, reflecting its early commitment to inclusive finance. By 2024, CCB's personal business loan non-performing loan (NPL) rate rose to 1.57%, due to external data fraud risks and asset quality issues tied to real estate collateral. CCB's digital inclusive finance model, utilizing data for loan approvals, has faced challenges from fraudulent activities, necessitating ongoing model optimization and risk management enhancements.
- Bank of Communications
- As of June 2024, the personal business loan non-performing rate for Bank of Communications was 0.88%. This marked an increase of below 10 basis points compared to the end of 2023. Despite the increase, it was relatively lower compared to other major state-owned banks. The bank continues to face challenges in managing personal business loans, with broader economic factors and market conditions impacting asset quality.
- Agricultural Bank of China
- As of June 2024, Agricultural Bank of China's personal business loan non-performing loan (NPL) rate was 0.77%, demonstrating an increase of less than 10 basis points from the end of 2023. Compared to other big state-owned banks, they reported a relatively stable NPL rate amid rising concerns over the sector's asset quality.
- Bank of China
- The article mentions that the Bank of China did not disclose its personal business loan non-performing loan rate for the period discussed.
- Postal Savings Bank of China
- The Postal Savings Bank of China had the highest personal business loan non-performing loan (NPL) ratio among large banks as of June 2024, standing at 1.88%. This ratio represents a small increase of 15 basis points from the end of 2023, highlighting a rising risk in personal business loans.
- Rong360
- Rong360 provided data indicating that between December 20, 2020, and January 18, 2021, the average interest rate for first-home loans was 5.22% and for second-home loans was 5.53%. During the same period, many banks offered business loan interest rates for sole proprietors at below 4%.
- Before 2021：
- Credit loans accounted for about 30% of China Construction Bank's inclusive finance loan portfolio.
- End of 2019：
- The total scale of personal business loans was 11.35 trillion yuan.
- End of 2020：
- The scale of personal business loans increased to 13.62 trillion yuan, a year-on-year growth of 20%.
- End of 2020：
- China Construction Bank's non-performing loan rate for personal business loans was 0.99%.
- By mid-2021：
- China Construction Bank's Party Committee decided to expand personal business loans, assigning responsibility to the Inclusive Finance Department.
- 2021：
- China Construction Bank launched the 'Merchant Cloud Loan' product, increasing the scale of credit loan customers.
- End of 2021：
- The scale of personal business loans reached 16.22 trillion yuan, a growth of 19%.
- End of 2021：
- China Construction Bank's non-performing loan rate for personal business loans decreased to 0.72%.
- End of 2022：
- The scale of personal business loans was 18.9 trillion yuan, up by 16.5%.
- End of 2022：
- China Construction Bank's non-performing loan rate for personal business loans further decreased to 0.65%.
- Start of 2023：
- China Construction Bank faced external data fraud risks affecting non-performing loan rates.
- End of 2023：
- The scale of personal business loans hit 22.15 trillion yuan, marking a growth of 17.2%.
- End of 2023：
- NPL ratios of personal business loans for banks like Shanghai Pudong Development Bank increased from previous values.
- Since 2024：
- China Construction Bank introduced dozens of new control functions in anti-fraud measures.
- First half of 2024：
- China Construction Bank's non-performing loan rate for personal business loans rose to 1.57%.
- End of June 2024：
- The NPL ratios of personal business loans at large banks, including Postal Savings Bank of China, China Construction Bank, etc., were disclosed.
- As of the end of June 2024：
- The balance of personal business loans stood at 23.8 trillion yuan.
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