The asset quality of the Chinese banking sector will remain generally stable in 2019, an official of the China Banking and Insurance Regulatory Commission said on May 10.
“China’s economy stabilized in the first quarter of 2019, better than expected, and will hopefully achieve stable growth for the whole year … The banking sector will continue to step up the efforts to dispose of nonperforming loans and will keep pressing ahead risk prevention and control in key areas,” said Liu Zhiqing, deputy director-general of the statistics IT and risk surveillance department of the CBIRC, the country’s top banking and insurance regulator.
Since 2017, the Chinese banking sector has disposed of nonperforming loans totaling 3.85 trillion yuan ($565 billion). As the volume of NPL formation is roughly the same as that of NPL disposal, the NPL ratio has basically remained stable, Liu said.
“Based on these factors, our preliminary judgment is that the asset quality of the banking sector will remain generally stable this year,” he said.
At the end of the first quarter, the NPL ratio of commercial banks stood at 1.8 percent, roughly the same as the number in the beginning of this year, while the balance of NPLs increased by 95.7 billion yuan to 2.16 trillion yuan during the same period.
Statistics from the CBIRC also show that banking institutions disposed of a total of 368.9 billion yuan in the first quarter, up by 30.9 billion yuan year-on-year. The loan loss provision coverage ratio of commercial banks was 192.2 percent as of March 31, higher than regulatory requirements, signifying that banks still have a strong loss resistance ability.
Meanwhile, China strengthened its financial support to key areas and weak links in the economy. In the first quarter, the banking sector offered 1.1-trillion-yuan in new loans to infrastructure construction, up by 94.8 billion yuan year-on-year. Bank loans for micro and small-sized enterprises with a credit line of less than 10 million yuan also increased by 24.7 percent, much higher than the growth rate of various types of loans over the same period.
“During the process of deepening supply-side structural reform in the financial sector, the CBIRC kept improving the efficiency of financial resource allocation, strengthening credit support to key areas and weak links in the economy, and stepping up the efforts to serve the real economy. At the same time, the regulator better integrated the prevention and mitigation of financial risks with its support for the real economy, promoting a virtuous circle in finance and the real economy,” said Liu.