Commentary on Political Economy

Wednesday 27 March 2024


China’s Property Crisis Is Rippling Through Its Biggest Banks

China’s property downturn is eroding the balance sheets of the nation’s largest state banks.

Photographer: Qilai Shen/Bloomberg

China’s protracted property downturn is eroding the balance sheets of the nation’s largest state banks as their bad loan ratios are creeping up.

Bank of Communications Co. reported Wednesday that its property bad loan ratio jumped to 4.99% at the end of last year from 2.8% a year earlier. While the balance of its overdue mortgages slipped, the special mention loans for the segment — a leading indicator of soured loans — jumped 23% to 9.88 billion yuan ($1.4 billion).

Its bigger rival, Industrial & Commercial Bank of China Ltd. saw its bad loans from residential mortgages rise 9.6% to 27.8 billion yuan, according to a Wednesday filing. While its property NPL ratio slipped to 5.37%, it was still the highest among all sectors.

Bocom’s Vice President Yin Jiuyong said the pressure to keep asset quality in check remains “immense” this year as it will take time for home sales and developers’ liquidity conditions to recover. Overall risk from its property exposure is still manageable, he said at an earnings briefing.

Both banks reported scant profit gains as interest margins narrowed.

Read more:
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The results offered a view into how the nation’s largest state-owned banks fared in the past year as Beijing tasked them with duties to help pump up the domestic economy as well as rescue its debt-laden property developers and local governments. At the same time, the slowing economy has put downward pressure on interest rates.

The big lenders’ profitability and asset quality are in focus as investors await to gauge their resilience in an economy that’s heavily reliant on bank lending to regain momentum. Combined profits at China’s commercial banks rose 3.2% to 2.38 trillion yuan last year, the slowest pace since 2020, according to official data. Outstanding bad loans climbed to a record 3.23 trillion yuan.

China Construction Bank Corp.Bank of China Ltd. and Agricultural Bank of China Ltd. are scheduled to announce their annual results on Thursday.

    — With assistance from Charlie Zhu and Amanda Wang

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