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Saturday, 13 September 2008
S&P forecasts rise in bad loans amid global slump
Mainland lenders will see a gradual increase in bad loans taken out by property developers and troubled export-oriented manufacturers amid a global economic slowdown, says Standard & Poor’s. More in comments...
Mainland lenders will see a gradual increase in bad loans taken out by property developers and troubled export-oriented manufacturers amid a global economic slowdown, says Standard & Poor’s.
The credit rating agency said mainland lenders were likely to see an increase in non-performing loans next year as Beijing’s tightening measures had slowed economic growth.
But banks’ profitability will remain “satisfactory” for the rest of this year and next as the government assigns additional loans to cash-strapped small enterprises reeling from rising materials costs and a slowdown in exports.
“Banks’ asset quality is still in good shape despite a slight increase in corporates’ bankruptcies,” said Liao Qiang, a credit analyst from S&P.
“The negative impact from the economic slowdown will continue to be immaterial next year. But it will be difficult to predict beyond 2009.”
Defying the slowing economy, listed mainland lenders have reported strong first-half net earnings ranging from 43 per cent at Bank of China and 162 per cent at China Citic Bank Corp.
Industrial and Commercial Bank of China, the country’s largest lender by market value, became the world’s most profitable bank after reporting a 57 per cent earnings growth.
Such robust profit growth “marked the peak of a fast-growing cycle” with slower and more sustainable growth in the future, said Bank of Communication chairman Jiang Chaoliang last month.
Analysts said growth in mainland banks’ core businesses including deposit and fee income was moderating amid weakening exports and policy risks.
Sustaining economic growth has become a bigger concern for mainland policymakers than cooling inflation, after expansion of the country’s economy declined for four consecutive quarters.
“A rise in non-performing loans is becoming more likely,” said China International Capital Corp in a recent research report.
“Earnings risks mainly come from expanding losses in US dollar bond investments, more aggressive provisions charges and plunging value in overseas acquisitions.”
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S&P forecasts rise in bad loans amid global slump
Natalie Chiu
12 September 2008
Mainland lenders will see a gradual increase in bad loans taken out by property developers and troubled export-oriented manufacturers amid a global economic slowdown, says Standard & Poor’s.
The credit rating agency said mainland lenders were likely to see an increase in non-performing loans next year as Beijing’s tightening measures had slowed economic growth.
But banks’ profitability will remain “satisfactory” for the rest of this year and next as the government assigns additional loans to cash-strapped small enterprises reeling from rising materials costs and a slowdown in exports.
“Banks’ asset quality is still in good shape despite a slight increase in corporates’ bankruptcies,” said Liao Qiang, a credit analyst from S&P.
“The negative impact from the economic slowdown will continue to be immaterial next year. But it will be difficult to predict beyond 2009.”
Defying the slowing economy, listed mainland lenders have reported strong first-half net earnings ranging from 43 per cent at Bank of China and 162 per cent at China Citic Bank Corp.
Industrial and Commercial Bank of China, the country’s largest lender by market value, became the world’s most profitable bank after reporting a 57 per cent earnings growth.
Such robust profit growth “marked the peak of a fast-growing cycle” with slower and more sustainable growth in the future, said Bank of Communication chairman Jiang Chaoliang last month.
Analysts said growth in mainland banks’ core businesses including deposit and fee income was moderating amid weakening exports and policy risks.
Sustaining economic growth has become a bigger concern for mainland policymakers than cooling inflation, after expansion of the country’s economy declined for four consecutive quarters.
“A rise in non-performing loans is becoming more likely,” said China International Capital Corp in a recent research report.
“Earnings risks mainly come from expanding losses in US dollar bond investments, more aggressive provisions charges and plunging value in overseas acquisitions.”
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