China bad-loan ratio rises ‘significantly’: Huarong Asset

BEIJING – China’s bad-loan ratio rose “significantly” in the first quarter, increasing risks for the nation’s banking industry, according to the nation’s largest manager of soured debt, the Bloomberg news agency reported.

The business environment this year has been “grim and complicated” as lenders face pressures on asset quality, liquidity and lending margins, China Huarong Asset Management Chairman Lai Xiaomin said during an internal meeting on April 15, according to a statement Tuesday on the website of the Beijing-based company.

China’s slowing economy has made it tougher for borrowers to repay debt, driving up banks’ sour loans for a ninth straight quarter as of December to the highest level since 2008, data from the banking regulator show. New nonperforming loans amounted to more than 60 billion yuan (S$12 billion) in the first two months of this year, compared with 100 billion yuan for all of 2013, China Business News reported on April 9, citing people it did not identify.

“The economic indicators we’ve seen so far are quite disappointing and repayment risks are rising across sectors from property to small businesses due to weak demand,” Ms Rainy Yuan, a Shanghai-based analyst at Masterlink Securities, said by phone. “Banks will be hit in such an operating environment but managers of bad assets like Huarong and China Cinda Asset Management stand to benefit” because they can accumulate more sour loans, she said.

Huarong’s profit in the three months to March climbed 75 per cent to 5.1 billion yuan from a year earlier, surpassing its target, Mr Lai said.

China’s four largest lenders are due to report first- quarter earnings starting April 24.