Chinese banks' bad loans increasedfor the ninth straight quarter to the highest level since the2008 financial crisis, highlighting pressures on asset qualityand profit growth as the world's second-largest economy falters.
Non-performing loans rose by 28.5 billion yuan ($4.7billion) in the last quarter of 2013 to 592.1 billion yuan, thehighest since Sept. 2008, the China Banking RegulatoryCommission said in a statement on its website yesterday. Badloans accounted for 1 percent of total lending, up from 0.97percent three months earlier.
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Chinese banks are struggling to keep bad soured loans incheck and extend earnings growth as a slowing economy andgovernment efforts to curb shadow financing make it harder forborrowers to repay debt. Standard & Poor's Ratings Services saidthis week loan quality will deteriorate "noticeably" in 2014as banks remain "heavily exposed to debt-laden local governmentfinancing platforms and manufacturers saddled withovercapacity."
Chinese banks have added 89 trillion yuan of assets, mostlythrough loans, over the past five years, equivalent to theentire U.S. banking industry's, CBRC data shows. By comparison,U.S. commercial banks held $14.6 trillion of assets at the endof September, according to the Federal Deposit Insurance Corp.
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Investors are increasingly concerned that the country'sinvestment through borrowing since 2008 may trigger a financialcrisis, Haitong Securities Co. said in December. Liabilities atnonfinancial companies may increase to more than 150 percent ofgross domestic product in 2014, raising default risks, thebrokerage said. The ratio at the end of 2012 of 139 percent wasalready the highest among the world's 10 biggest economies.Weakest Pace
China's economy grew 7.7 percent in 2013, the same rate asin 2012. Growth is forecast to drop to 7.4 percent this year,the weakest pace since 1990, based on the median estimate in aBloomberg News survey.
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The government has spent more than $650 billion bailing outbanks by carving out bad loans and injecting capital since thelate 1990s, after years of government-directed lending causeddefault-risk to balloon. In Oct. 2008, it removed about 800billion yuan of non-performing loans from Agricultural Bank ofChina Ltd. (601288) 's balance sheet, causing the industry-wide bad loanlevel to drop by more than half from 1.27 trillion yuan in justone quarter.
Banks' bad loan ratio may climb to 1.2 percent this year,Lian Ping, chief economist at Shanghai-based Bank ofCommunications Co. said on Feb. 11.
Combined net income at China's banks rose 14 percent from ayear earlier to 1.4 trillion yuan in 2013, slowing from a 19percent increase in 2012, according to CBRC data.
To contact Bloomberg News staff for this story:Jun Luo in Shanghai at firstname.lastname@example.org
To contact the editor responsible for this story:Chitra Somayaji at email@example.com
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