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Increase in bad loans for Chinese banks

Increase in bad loans for Chinese banks

(8 May 2013 – China) The financial reports of major Chinese banks have shown an increase of bad loans as asset quality diminished in the first quarter.

The Chinese economy weakened further and 14 out of 16 banks reported a rise in bad loans.

Outstanding loans of 16 listed banks came to US$68.8 billion (A$67 billion) in March, with 14 banks reporting a rise in bad loans.

New non-performing loans (NPLs) hit US$3.6 billion from January to March.

Ten out of 16 listed banks witnessed a rise in both outstanding NPLs and NPL ratios. China CITIC Bank reported the biggest jump in its bad loan ratio, which rose by 0.14 percentage point from three months earlier.

Only two lenders reported a drop in both bad loans and NPL ratios. Agricultural Bank of China's bad loans fell by US$23.7 million from the end of 2012 or 1.27 percent of the total loans, while the Bank of Beijing saw a US$21 million, accounting for 0.54 percent of total loans.

Analysts believe the rise in NPLs was mainly because economic growth lacked momentum and a less optimistic scenario has affected companies' operations, which led to more defaults.

They noted, however, that the scale of the increase in bad loans was mild and might fall in the coming months as the economy stabilises.

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