Non-performing loans [NPL] of commercial banks in China dropped by 62.98 billion yuan to 497.33 billion yuan ($72.85 billion) in 2009, the China Banking Regulatory Commission [CBRC] said in a statement on Friday.
NPLs — which aside from the fiscal cost can effectively reduce bank capital and make them technically insolvent — represented 1.58 percent of the banks’ loan books, down 0.84 percentage points from the start of the year. CBRC said provision cover was 155.02%, up 38.57 percentage points.
Reuters: Ratings agency Fitch, affirming its “A+” long-term currency rating on China, said on Thursday that it was concerned about “an eventual deterioration in banks’ asset quality” after the surge in lending.
China undertook a massive loosening of credit last year as the government tried to free up more cash in an effort to beat the economic slowdown.
“In the agency’s view, falling non-performing loans do not indicate that banks’ asset quality is improving, as some new loans have been used to roll over delinquent obligations, and the predominance of bullet-oriented repayment structures means that any problems associated with recent lending are unlikely to be evident until the loans mature,” Fitch said.