Chinese bank asset growth slows to 6.6% in Q1 amidst deleveraging campaign

This compares to 15.7% a year ago.

The growth of Chinese bank asset slowed from 15.7% to 6.6% in Q1 as lenders are shunning shadow banking activities and turning to conventional lending as Beijing enters another year of deleveraging, according to credit rating agency Moody’s. 

Also read: Chinese banks assets plunge to single digits in 2017 as loans take over

Asset growth was weakest amongst midsized joint-stock commercial banks with 3.0% YoY growth in Q1 whilst the assets of city commercial banks grew at a faster pace at 7.9% YoY.  China’s entrusted loans contracted 3.5% YTD in the first four months of the year with contribution of entrusted loans to new increase in total social financing (TSF) declining to 5.9% in Q1, according to UOB Kay Hian.

Also read: China's entrusted loans plunge 3.5% in January-April as banks shun shadow finance

Asset quality is also gradually stabilising as the average non performing loan ratio clocking in at 1.75% in Q1 whilst special mention loans dipped from 3.49% in Q4 to 3.42%.

Capitalisation has also slightly softened, with the average Core Tier 1 capital ratio for all commercial banks down from 10.75% in Q4 to 10.72% in Q1. Pressure on the equity capital position of banks are expected to further ease as asset growth continues to slow down, Moody’s added.

"Looking ahead, we expect the regulators will maintain a cautious approach in order to alleviate any potential disruption to the real economy from the clampdown on shadow banking and interbank activities," says Nicholas Zhu, a Moody's vice president and senior analyst.