Commercial banks' NPL ratio moves higher in Q4

The China Banking Regulatory Commission said on Tuesday that the nonperforming loan ratio of commercial banks in China a the fourth quarter came in at a 1.81 percent, up from an NPL ratio of 1.76 percent in the third quarter－a development which triggered further measures by the national banking regulator.

The NPL ratio increased by 5 basis points from the previous quarter and 14 basis points from the previous year's fourth quarter, while the Q4 ratio of loan impairment losses to nonperforming loans fell about 5.7 percentage points year-on-year to 175.5 percent, according to the regulatory commission.

At a national meeting on banking supervision and management on Tuesday, CBRC Chairman Shang Fulin said the regulator will give higher priority to financial risk prevention and control in 2017.

Shang said it will stick firmly to its baseline of preventing systemic risk and solidly push forward risk prevention and control in key areas, as well as tightly controlling NPL risks.

The CBRC said it will refine the classification of credit assets, intensify the screening of hidden risks, tightly control the increase of risks and strictly manage the power of approval at different levels.

The commission said it will restrain companies from escaping and revoking debts and strengthen cooperation and information sharing with local government and legal departments.

It added that it will also step up punishment of discredited companies and company owners, strictly control risks in local government financing vehicles, and press forward with a campaign to tackle peer-to-peer lending risks and telecom fraud.

"In the short and medium-term, Chinese industries with excess capacity will continue reducing capacity and stocks," said Wen Bin, principal researcher at China Minsheng Banking Corp Ltd.

"Companies on the brink of bankruptcy, known as 'zombie companies', will exit from the market. These will bring further pressure to banks with regard to nonperforming loans, but the risk is generally controllable."

In 2016, banks expanded channels and innovated measures for NPL disposal by having trial programs on nonperforming asset securitization and debt-to-equity swaps.

Wen said additionally, banks will control the increase in their NPLs by adjusting their credit structure－making different credit policies for different clients, sectors and regions based on China's industrial policies.

Overall, the banking sector operated steadily last year.

Data from the CBRC showed net profits for the year rose by 4 percent to 2 trillion yuan ($289.8 billion).