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Most Chinese commercial banks maintained or improved their asset quality in the first half of the year despite ongoing risks in the real estate and personal lending sectors.
From January to June, 42 listed banks published financial results with varied outcomes. Twenty reported lower non-performing asset (NPA) ratios compared to the end of last year, fifteen remained unchanged, and seven experienced increases. On a quarter-to-quarter basis, sixteen banks saw declines, twenty remained steady, and five reported rises.
Out of China’s six state-owned banks, five reduced their NPA ratios by one to three basis points in the first half. The Postal Savings Bank of China was the exception, increasing its ratio by two basis points to 0.92 percent, yet it still had the lowest ratio among the six.
Overall, the major banks generally showed better recovery in their corporate loan portfolios, but difficulties in the property sector persisted. Industrial and Commercial Bank of China and Bank of Communications both saw their real estate-related NPA ratios rise by 0.38 and 0.44 percentage points, respectively. The Agricultural Bank of China experienced the worst performance, with a real estate NPA ratio reaching 5.35 percent.
Within city commercial banks, Guiyang Bank demonstrated significant fluctuations in asset quality. After an 88-basis-point increase in the first quarter, its NPA ratio decreased in the second, ending at 1.7 percent by June 30. This was the fourth highest among 42 banks.
Banks with the highest overall NPA ratios included Bank of Lanzhou at 1.81 percent, Bank of Zhengzhou at 1.76 percent, and Qingdao Rural Commercial Bank (QRCB) at 1.75 percent.
For several financial institutions, real estate and personal loans continued to be key sources of credit stress during the first half. Guiyang Bank’s real estate NPA ratio jumped 70 basis points to 1.75 percent, while its personal loan NPA ratio increased by 33 basis points to 3.19 percent.
QRCB, ranked third overall, reported a decrease in its general NPA ratio but saw a sharp increase in property-related issues, with its real estate NPA ratio soaring to 21.32 percent from 7.17 percent. Its non-performing loan balance more than doubled to 2.1 billion yuan.
Other banks significantly impacted by real estate challenges included Bank of Zhengzhou (property NPA ratio of 9.75 percent), Bank of Chongqing (7.19 percent), Bank of Hangzhou (6.44 percent), Agricultural Bank of China (5.35 percent), and China Merchants Bank (4.74 percent).
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