As China heads for its slowest economic growth in a quarter-century, borrowers struggling with sluggish demand for their goods and services are finding it hard to repay loans.
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“We’re going to have to be more prepared for seeing days when the renminbi does trade in this manner”, he said. Latest rocking performance is coming as speculation has risen high that People’s Bank of China (PBoC) will broaden up its testing of full Yuan convertibility. Small differences in the margin can yield large changes in a bank’s earnings; during periods of robust earnings, the margin may reach around 2.8%.
At BoC, impairment losses on assets increased by 14.88 percent in January-September, while CCB reported a 62.65 percent increase.
The central bank announcement, which gave no timetable for the move, followed a top-level Communist Party meeting which discussed the country’s development plans for the next five years. Last week, the central bank abolished the ceiling on deposit rates. “The bad-loan situation will only deteriorate over the next year”.
While the banking industry’s official nonperforming loan ratio is 1.5 percent, analysts say the number is understated.
China’s three other big banks – Bank of China Ltd (BOC), Agricultural Bank of China Ltd (AgBank) and China Construction Bank Corp (CCB) – also saw near-flat profit growth in third-quarter results reported earlier this month. Special-mention loans-which include overdue loans banks haven’t yet deemed to be in default-rose 2.3% at the end of June to 204.9 billion yuan at Bank of China, almost twice the volume the lender marked as nonperforming.
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At a press briefing in Beijing in August, ICBC President Yi Huiman indicated that the lender might need to abandon a target of keeping its nonperforming loan ratio at 1.45 percent this year, citing “severe” conditions.
