NPL disposals on rise amid asset cleanup

Many commercial banks have been intensively disposing of nonperforming loans since the beginning of the fourth quarter, in an effort to alleviate asset quality pressure and optimize overall structure.

Data from the China Central Depository & Clearing Co (CCDC) show that nearly 30 banks have issued NPL transfer announcements since October, covering categories such as personal consumption loans, individual business loans and credit card overdrafts.

Ping An Bank launched two NPL transfer projects involving credit card overdrafts on Monday, with total outstanding principal and interest of around 328 million yuan ($46.3 million) and 477 million yuan, respectively. On the same day, the Changsha, Hunan province branch of China Guangfa Bank relisted an NPL transfer project involving individual business loans, with outstanding principal and interest exceeding 220 million yuan.

China Bohai Bank announced on Oct 10 that it would transfer creditor's rights assets totaling 69.83 billion yuan. The preliminary minimum consideration for the planned transfer will be no less than around 48.88 billion yuan, equivalent to about 70 percent of the total creditor's rights value.

The core reasons many banks are accelerating NPL transfers include optimizing asset structures, saving on capital occupation, and enhancing capital adequacy and profitability. This trend helps lower banks' NPL ratios, reduce provisioning pressure, and free up room to focus on high-quality clients and growth areas, said Lou Feipeng, a researcher at Postal Savings Bank of China.

Since the beginning of this year, nonperforming assets disposal in the banking sector has accelerated. The National Financial Regulatory Administration said banks disposed of 1.5 trillion yuan of NPAs in the first half, 123.6 billion yuan more than a year earlier.

Some lenders are increasingly shifting toward proactive NPA management, building a full-cycle, proactive and ecosystem-based NPA value management system. For firms that still have operating value but are temporarily undergoing difficulties or varying levels of distress, banks are working with asset management companies to design comprehensive restructuring plans to maximize asset value, said Dong Ximiao, deputy director of the Shanghai Institution for Finance & Development.

The CCDC said that in the first quarter, the total transaction volume of NPL transfers, including both unpaid principal and interest, reached 48.3 billion yuan, up 139 percent year-on-year. During the same period, transaction volume for batch transfers of personal NPLs surged 761 percent year-on-year to 37.04 billion yuan, of which batch transfers of personal consumption NPLs accounted for 72.4 percent.

Recently, several banks have begun selling real estate directly via third-party platforms, with many properties already listed or in the process of being listed.

Experts said that compared with judicial auction properties, "direct-from-bank properties" have an advantage in title clarity. Before listing, banks have conducted title checks and completed separation of creditor's rights and obligations, mitigating potential risks associated with judicial auction properties, such as private lending disputes, undisclosed lease agreements or second mortgages.

One reason banks are accelerating real estate disposals is rising NPL pressure. Interim results for 2025 showed rising mortgage NPL ratios among listed banks, with some lenders seeing increases above 20 basis points. However, mortgage NPL risks remain generally manageable, said a report by Kaiyuan Securities.

In addition to NPLs from individual borrowers, some property developers also defaulted on loans. After litigation and court judgments, banks obtained property titles and explored direct sales to the public.

Li Yujia, chief researcher at the Guangdong Housing Policy Research Center, said recent attention to direct-from-bank property sales is driven by an increase in sales volume, mainly among small and medium-sized banks, and banks' shifting emphasis from B2B to a balance of B2B and B2C.