The asset quality of most listed banks of China has improved in the first half of the year, which was evident in their dropping non-performing loan (NPL) ratio in contrast to the rise of the ratio for about half of the listed banks in the first six months last year.
The NPL ratio of six major state-owned banks has declined in the first half of the year, with that of the Postal Savings Bank of China (PSBC) being the lowest at 0.83 percent. The Bank of China reported the most decline in NPL ratio, down 0.16 percentage points from the end of last year.
Besides state-owned lenders, many joint-stock banks, city-based commercial banks and rural commercial banks also saw improving asset quality. For example, the NPL ratio of the China Merchants Bank was 1.01 percent at the end of June, and that of the Bank of Ningbo was 0.79 percent, both at a low level.
The improving asset quality is attributable to the lenders' restructuring efforts and improving risk management.
The financing demand of enterprises has climbed since the beginning of the year as the economy has sustained recovery from COVID-19. To meet the demand, many banks have channeled credit to key industries, regions, sectors, as well as high-quality customers. This could help prevent financial risks and serve the real economy.
The Industrial and Commercial Bank of China (ICBC), China's biggest commercial lender, said its NPL ratio stood at 1.54 percent at the end of June, down 0.04 percentage points from the end of 2020.
While paying attention to risk management, the ICBC has put more emphasis on key industries supported by macro policies, key regions for national strategic development and customers with good market prospects to optimize the credit structure, said Wang Jingwu, vice president of the ICBC.
In the first half of this year, the Bank of Communications dealt with 43.72 billion yuan (6.77 billion U.S. dollars) of NPLs, up about 20 percent year on year. The ICBC dealt with NPLs totaling 84.4 billion yuan and the China Construction Bank (CCB) disposed of NPLs worth 87 billion yuan, a record high for the bank.
Many banks have increased their provision coverage, indicating improving capacity to fend off risks.
In the first half of this year, the provision coverage rates of the six major state-owned banks rose compared with the end of 2020.
The provision coverage rate of the PSBC was 421.33 percent, 13.27 percentage points higher than that at the end of the previous year. Both the CCB and the Agricultural Bank of China had provision coverage rates of more than 200 percent at the end of June.
Wang noted that the pandemic's impact on the asset quality of Chinese banks have been fading, but the lenders should continue to improve the risk management capacity to safeguard asset quality and support high-quality development.