Banks Warned Against Developers, Polluting Borrowers
CBRC wary over loans guaranteed by local governments
Reuters in Beijing – Updated on Feb 28, 2008
The mainland’s banking regulator on Thursday warned big lenders of the risks of lending to real-estate developers and highly polluting or energy-intensive firms, ordering them to step up controls to prevent a rebound in bad loans.
Despite a drop in their non-performing loan ratio last year, banks should not be complacent because they faced stiff challenges ahead, China Banking Regulatory Commission vice-chairman Jiang Dingzhi told executives from the big lenders.
“Banks should carefully implement the government’s macro control policies and effectively prevent various dangers,” he said, according to the watchdog’s website.
As well as singling out property developers and industries that consumed a lot of energy and caused pollution, Mr Jiang told banks to keep a close eye on manufacturers with obsolete plants and firms whose loans are guaranteed by local governments.
Highlighting the risks of real-estate lending, figures from the Shanghai banking regulator show two billion yuan (HK$2.18 billion) in property loans went sour last year, twice as much as in 2006, according to state media.
More than one quarter of the new loans extended by domestic banks in Shanghai last year went to real estate, and by the end of last year the sector accounted for about 32 per cent of their outstanding loans, the 21st Century Herald reported on Thursday.
The National Audit Office issued a separate warning that banks were lending too much to finance road construction – their exposure was 800 billion yuan at the end of 2005.
Bad management of some roads and insufficient toll collections meant many banks were finding it hard to recoup their loans, state media said.
The bank regulator said the four banks among the Big Five that are listed on the stock market – Industrial and Commercial Bank of China, China Construction Bank, Bank of China and Bank of Communications – had an average non-performing loan ratio of 2.87 per cent last year, down from 3.6 per cent a year earlier.
The quartet improved their return on assets to 1.11 per cent last year from 0.88 per cent in 2006.
The other member of the Big Five, Agricultural Bank of China, is still burdened by a high NPL ratio because the state has yet to carve out its bad loans and recapitalise the bank.
Including ABC, the five largest banks had a NPL ratio of 8.05 per cent at the end of last year, down 0.55 percentage point from a year earlier.