China’s big banks see bad debt ratio rebound despite slowing mortgage issuance

(Yicai Global) Sep 2 – According to the first-half results of six of China’s largest state-owned banks, mortgage issuance slowed and their risk exposure in the real estate sector fell below the mandatory safety line, although their non-performing sector loan ratio rebounded.

Mortgage origination generally slowed in the six months ended June 30, with the proportion of industry loan balance and personal mortgage balance generally falling below the regulatory safe level, Yicai Global found. .

Three reasons are cited in the financial statements of lenders: active risk control by banks; the impact of the Covid-19 pandemic; and lower demand for credit from the real estate sector.

At the end of June, the six banks’ real estate loans totaled CNY 3.72 trillion (USD 540 billion), an increase of CNY 208.2 billion (USD 30.17 billion) from CNY 3.51 trillion at the end of the year. last. Personal home loans increased by approximately CNY 448 billion, from CNY 26.48 trillion (USD 3.84 trillion) to CNY 26.92 trillion.

Among lenders, the Agricultural Bank of China had the largest loan balance for developers, some 843 billion yuan. China Construction Bank ranked second with 763 billion yuan, and Postal Savings Bank of China got the least with 179 billion yuan.

The six banks’ home loan balances were less than the required maximum of 40% of their total loans. Bank of Communications had the highest, at 6.97%.

ABC and CCB remained the top two for home loan balance, with Bank of China overtaking Industrial and Commercial Bank of China to rank third due to its relatively higher net home loan amount during the period.

Net new home loans issued by BoCom and PSB, two relatively small banks, have jumped 28% and 17.7%, respectively, since the end of last year. The net loan growth rates of the other four banks were below 10%.

Slowdown in mortgage issuance

On the other hand, although the balance of personal mortgages of the six banks at the end of the period increased compared to the end of the previous year, the proportion of their personal mortgages decreased compared to the end of last year, indicating that the growth rate of personal mortgage issuance is also slowing.

Among them, personal mortgage balances at CCB and PSB fell to 31.8% and 31.9%, respectively, which was just below the 32.5% ceiling set by the regulator. At the end of last year, both banks were still above the red line.

But despite the slowdown in loan origination, the six banks’ home loan NPL ratios at the end of the first half of the year rebounded from the end of last year, and the proportions of non-performing personal mortgages also rose. surged, except at ABC, where it remained flat.

The Bank of Canada’s impaired mortgage ratio at the end of the period reached 5.67%, or CNY41.68 billion (US$6.03 billion) – both figures being the highest among the six lenders. The second and third ranks were ICBC and ABC. PSB had the lowest NPL balance as well as the lowest amount, at CNY 1.79 billion (USD 260 million) and 1.01%, respectively.

But unlike the other five banks whose balance of failed business loans was significantly higher than that of personal mortgages, PSB’s personal mortgage non-performing balance reached CNY 11.64 billion, far exceeding its non-performing balance of 1 CNY.79 billion. for developers. It also had a bad debt ratio of 0.52% of retail mortgages, also the highest among the six banks.

In response to the previous storm of unfinished projects and the risk exposure of the banks, the executives of the six lenders responded during their respective interim results briefings that the risk was still controllable due to the relatively small amount mortgage loan balances involved in the corresponding closing. projects.

Publishers: Tang Shihua, Peter Thomas

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John A. Bogar