Chinese banks had the biggest quarterly increase in bad loans since 2005 as a slowdown in the world’s second-largest economy causes defaults to rise.
Nonperforming loans rose by 54 billion yuan (US$8.7 billion) in the three months through March to 646.1 billion yuan, the highest level since September 2008, according to data released by the China Banking Regulatory Commission (CBRC) yesterday. Bad loans accounted for 1.04 percent of total lending, up from 1 percent three months earlier.
The 10th straight quarterly increase in defaults adds to concern that banks’ profitability may slip as they build buffers to cover loan losses. Policymakers have also been cracking down on financing to weaker borrowers to rein in total debt, which has climbed to more than double the nation’s GDP.
“Asset quality is now the biggest overhang on the banking sector... The [Chinese] government’s reluctance to use stimulus and ease monetary policy has made it difficult for many borrowers to repay debt,” Shanghai-based Masterlink Securities Corp analyst Rainy Yuan said by telephone.
Concern that profitability will decline further dragged the Hong Kong shares of China’s five biggest banks down by an average 7.3 percent this year to Thursday, compared with the benchmark Hong Kong’s Hang Seng Index’s 2.5 percent drop. The lenders traded at an average 4.8 times estimated 2014 profit, close to the lowest valuations on record.
Combined net income at China’s banks rose 16 percent to 427.6 billion yuan in the first quarter from a year earlier, CBRC data show. Their net interest margin, a key measure of lending profitability, fell to 2.58 percent as of March from 2.68 percent in December.
Lending in China is slowing as the government discourages credit to overextended industries and local governments as it cracks down on activity outside the formal banking system.
The nation’s broadest measure of new credit shrank 9 percent in the first quarter, and money supply in March grew at the slowest pace on record, underscoring risks of a deeper slowdown.
China’s economy expanded 7.4 percent in the first quarter, the slowest in 18 months. Growth of 7.3 percent is forecast for this year, the weakest pace since 1990, based on the median estimate in a survey of economists.
The economic slowdown has hurt borrowers’ ability to repay debt and driven defaults higher. The five biggest lenders had 377.1 billion yuan of nonperforming loans at the end of March, an increase of 8 percent from the beginning of the year, a separate CBRC statement on Thursday showed.
Chinese banks had 1.8 trillion yuan of loan-loss reserves at the end of March, accounting for 274 percent of their nonperforming loans, according to the regulator. That fell from 282.7 percent as of December.
Shanghai Chaori Solar Energy Science & Technology Co (超日太陽能) in March became the first Chinese company to default on onshore bonds when it failed to make a full coupon payment.
China averted its first trust default in at least a decade in January as investors in a 3 billion yuan product distributed by International Commercial Bank of China Ltd (ICBC, 中國工商銀行) were bailed out days before it matured.
The government has spent more than US$650 billion bailing out banks by carving out bad loans and injecting capital since the late 1990s, after years of government-directed lending caused default risk to balloon. In 2005, the nonperforming loan ratio at state-owned banks stood at 15 percent.
The government pumped US$15 billion of capital into ICBC in April 2005.
In October 2008, the government injected US$19 billion into Agricultural Bank of China Ltd (中國農業銀行) and removed about 800 billion yuan of nonperforming loans from its balance sheet.
The domestic unit of the Chinese-owned, Dutch-headquartered chipmaker Nexperia BV will soon be able to produce semiconductors locally within China, according to two company sources. Nexperia is at the center of a global tug-of-war over critical semiconductor technology, with a Dutch court in February ordering a probe into alleged mismanagement at the company. The geopolitical tussle has disrupted supply chains, with some carmakers reportedly forced to cut production due to chip shortages. Local production would allow Nexperia’s domestic arm, Nexperia Semiconductors (China) Ltd (安世半導體中國), to bypass restrictions in place since October on the supply of silicon wafers — etched with tiny components to
Singapore-based ride-hailing and delivery giant Grab Holdings Ltd has applied for regulatory approval to acquire the Taiwan operations of Germany-based Delivery Hero SE's Foodpanda in a deal valued at about US$600 million. Grab submitted the filing to the Fair Trade Commission on Friday last week, with the transaction subject to regulatory review and approval, the company said in a statement yesterday. Its independent governance structure would help foster a healthy and competitive market in Taiwan if the deal is approved, Grab said. Grab, which is listed on the NASDAQ, said in the filing that US-based Uber Technologies Inc holds about 13 percent of
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday received government approval to deploy its advanced 3-nanometer (3nm) process at its second fab currently under construction in Japan, the Ministry of Economic Affairs said in a news release. The ministry green-lit the plan for the facility in Kumamoto, which is scheduled to start installing equipment and come online in 2028 with a monthly production capacity of 15,000 12-inch wafers, the ministry said. The Department of Investment Review in June 2024 authorized a US$5.26 billion investment for the facility, slated to manufacture 6- to 12nm chips, significantly less advanced than 3nm process. At a meeting with
Taiwan’s food delivery market could undergo a major shift if Singapore-based Grab Holdings Ltd completes its planned acquisition of Delivery Hero SE’s Foodpanda business in Taiwan, industry experts said. Grab on Monday last week announced it would acquire Foodpanda’s Taiwan operations for US$600 million. The deal is expected to be finalized in the second half of this year, with Grab aiming to complete user migration to its platform by the first half of next year. A duopoly between Uber Eats and Foodpanda dominates Taiwan’s delivery market, a structure that has remained intact since the Fair Trade Commission (FTC) blocked Uber Technologies Inc’s
RSS