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People's Daily Online>>China Business

Amount of bad loans may rise, says Deloitte

By Chen Jia  (China Daily)

08:43, April 06, 2012

Weak property market and slow economic growth cited as causes

China's banks may see a moderate rise in the amount of non-performing loans this year as the property market weakens and economic growth slows, putting more pressure on the asset quality of lenders, according to a report from Deloitte China.

Loan defaults from companies in the real estate sector may be the biggest potential risk in 2012, because developers' financial condition is deteriorating while the government is unlikely to alter its policies to control the property sector in the short term, according to the report released on Thursday.

However, the loan risks to local governments' financing platforms will be "fundamentally under control", said the report.

According to data from the China Banking Regulatory Commission, by the end of last year, the total amount of commercial banks' non-performing loans had reached 427.9 billion yuan ($67.8 billion), 20.1 billion yuan more than that in the third quarter of 2011. The bad debt ratio was 1 percent.

"The number of non-performing loans is expected to slightly increase in the next two years, but it may not change a lot from last year's situation," said Wang Pengcheng, co-leader of Deloitte Global Financial Services Industry. He didn't give a specific prediction for 2012.

A forecast by Citic Securities indicated that the volume of Chinese banks' bad debt may increase by 5 to 10 percent during 2012, while the non-performing loan ratio will be less than 1.3 percent, amid the sluggish economic environment and falling profits.


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