Although Chinese banks saw their assets increase while the ratio and balance of bad loans both sank in 2009, the nation’s bank regulator warned over the weekend that banks should pay attention to future risks, especially in the property market.
The total foreign and domestic currency assets of Chinese financial institutions rose 26.3 percent year-on-year to 78.8 trillion yuan ($11.54 trillion) in 2009, and combined liabilities rose 26.8 percent from last year to 74.3 trillion yuan ($10.88 trillion), the China Banking Regulatory Commission (CBRC) announced on its website Saturday.
"The rise of total assets was due to increasing mid- and long-term loans, and the rise of liabilities was largely due to deposits from enterprises, which get loans from banks but do not use all of them, as well as increasing residents’ deposit," said Zhao Xijun, deputy director of the School of Finance at Renmin University of China.
Zhao expected that banks’ total assets and liabilities increase in 2010 would not be as large as in 2009, but the quality of assets and liabilities would become better.
The bad loan ratio among major commercial banks, including State-owned and joint-stock commercial banks, fell to 1.59 percent, down 0.86 percentage points from the beginning of 2009. Bad loans stood at 497.33 billion yuan ($72.86 billion), down 62.98 billion yuan ($9.23 billion) from the beginning of 2009.
"It is good to see the decreasing bad loan ratio and balance in China, as ’toxic assets’ in other countries were increased during the financial crisis," Zhao commented. "However, banks still face challenges from their mid- and long-term loans to enterprises."
New lending in December rose to 379.80 billion yuan ($55.64 billion) from November’s 294.80 billion yuan ($43.19 billion), and new lending for the whole year in 2009 amounted to 9.59 trillion yuan ($1.40 trillion), almost double the level in 2008, the People’s Bank of China, the central bank, said in an announcement on its website Friday.
Normally bad loan ratios rebound two years after a credit spree, said Li Shanshan, an analyst at BOCOM International Holdings.
The CBRC said at an annual conference Friday that banks should be wary of credit risks despite the decrease in bad loan ratios and balance.
The regulator said banks should ensure that credit enters the real economy, and restrict lending to high-polluting, high-energy consuming industries and those with overcapacity
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