Lenders' asset quality declines further in Q1

Agricultural Bank of China's booth at a banking trade show in Beijing. Out of 16 listed Chinese banks, only Agricultural Bank of China and Bank of Beijing reported a decline in both bad loans and non-performing loan ratios. Provided to China Daily

Chinese banks' asset quality continued to deteriorate in the first quarter as the economy faltered, according to the financial reports of major banks.

The outstanding soured loans of 16 listed banks totaled 424 billion yuan ($68.8 billion) at the end of March, and 14 banks saw an increase in bad loans, with newly added non-performing loans, or NPLs, reaching 22.2 billion yuan from January to March.

The financial results showed that 10 out of 16 listed banks witnessed a rise in both outstanding NPLs and NPL ratios. Among them, China Citic Bank reported the biggest jump in its bad-loan ratio, which went up by 0.14 percentage point from three months earlier.

Only two lenders reported a decline in both bad loans and NPL ratios. Agricultural Bank of China's bad loans fell by 165 million yuan from the end of 2012, taking up 1.27 percent of the total loans, while those of the Bank of Beijing dropped by 130 million yuan, accounting for 0.54 of total loans.

"The rise in non-performing loans was mainly because the economic growth seems to still lack momentum, and the less optimistic scenario has affected companies' operations, which led to more defaults," said Guo Tianyong, director of the Research Center of the Chinese Banking Industry at the Central University of Finance and Economics.

He said the scale of the increase in bad loans is still mild and may decrease in the following months as the economy stabilizes.

Meanwhile, the trend for more overdue loans — an indicator of future bad loans — also continued in the first three months of the year.

Bank of Communications, one of the five largest State-owned lenders, saw its overdue loans rise 12.4 percent from the end of 2012 to 40.7 billion yuan.

The bank's overdue loans with defaults of more than 90 days increased 25 percent to nearly 5.2 billion yuan.