Chinese banks should brace for bad loans: CBIRC

Outstanding non-performing loans totalled $514b in end-June.

The Chinese banking sector should be ready for a surge in bad loans due to the pandemic-induced economic plan, reports Reuters.

The China Banking and Insurance Regulatory Commission (CBIRC) said that some banks’ profit growth would slow sharply whilst others will see profit declines. The deterioration of asset quality at some small and mid-sized financial institutions were accelerating, the regulator noted.

If banks were to make the minimum amount of provisions for their non-performing loans, which some have yet to do, profits for the sector would fall by more than $50b (CNY350b), the regulator added.

Outstanding non-performing loans in the sector totalled $514b (CNY3.6t) as of end-June, whilst the bad loan ratio rose 0.08pp to 2.10%, CBIRC said.

Small firms have been allowed to delay loan and interest payments and the central government has called on the country’s financial institutions to sacrifice $214b (CNY1.5t) in profits this year to help counter the economic impact of the virus on companies.

Here's more from Reuters.