Banks report decline in their 2021 nonperforming loan ratios

Many A-share listed banks in China recorded a decline in their nonperforming loan ratios last year amid stepped-up efforts in financial risk mitigation and the disposal of nonperforming assets.

More than 20 A-share listed commercial banks had issued their financial previews or annual reports for the year 2021 as of Thursday. Most posted a decline in their NPL ratio.

Jiangsu Jiangyin Rural Commercial Bank Co Ltd saw its NPL ratio drop by 47 basis points at the end of last year compared to the end of 2020－the largest decrease among its peers.

It was followed by Jiangsu Suzhou Rural Commercial Bank Co Ltd at 28 basis points and Bank of Suzhou Co Ltd at 27 basis points. China CITIC Bank Corp Ltd, a Beijing-based national joint-stock commercial lender, also logged a decrease of its NPL ratio by 25 basis points.

Ping An Bank Co Ltd said it has strengthened comprehensive risk management and its overall asset quality remains stable. Its NPL ratio fell 16 basis points year-on-year to 1.02 percent at the end of 2021, and its balance of NPLs fell by 115 million yuan ($18 million) during the same period.

The Shenzhen, Guangdong province-based national joint-stock commercial lender promoted comprehensive and meticulous risk management by deepening work carried out on risk alerts to give a more agile response to risks in a timely manner. It also ramped up clearing and disposal efforts for troubled assets.

Last year, Ping An Bank wrote off 40.42 billion yuan in nonperforming loans. Its recovery of nonperforming assets was 32.77 billion yuan, up 25.7 percent year-on-year, the bank said in its 2021 annual report released on Thursday.

"From 2017 to 2021, China dismantled high-risk shadow banking worth up to 25 trillion yuan. In the past five years, its banking sector disposed of non-performing assets worth 12 trillion yuan, of which more than 6 trillion yuan was handled within the past two years," Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said at a recent news conference held by the State Council Information Office.

Last year, the banking sector disposed of nonperforming assets worth 3.13 trillion yuan, hitting a new record after the amount reached 3.02 trillion yuan in 2020.All these efforts provided assurance that China will hold the bottom line of avoiding systemic financial risks, the CBIRC said.

The regulator said it will properly deal with the rebound of nonperforming assets, continuously push for mergers, acquisitions and restructuring of small and medium-sized financial institutions, and support banks accelerating disposal of nonperforming assets in 2022.

"China should have a grip on the strength and pace of financial risk prevention and control while proceeding with a firm resolution and confidence," said Dong Ximiao, chief researcher at Merchants Union Consumer Finance Co Ltd.

Dong advised regulators to take effective measures to ramp up support for small and medium-sized banks with the aim of maintaining stability in the banking system. In addition, China will see the primary responsibility for financial risk control and mitigation fulfilled by local governments to prevent local government debt risk from spreading to the financial system, he said.

To expand their ways of disposing of NPLs, some small and medium-sized banks required investors to buy their nonperforming assets while the banks were launching capital increases through private placements－the process of raising capital by offering securities to pre-selected investors and institutions rather than on the open market.

Zeng Gang, deputy director-general of the National Institution for Finance & Development, said the banking sector will continue to stabilize economic growth to mitigate potential risks, strengthen NPL write-off practices and increase the ratio of allowance for impairment losses on loans to NPLs for the purpose of consolidating its risk resistance capacity.