Latest News:  
Beijing   Shower    24 / 17 ℃  City Forecast

English>>China Business

Fitch warns on risks facing China’s banks

By Song Shengxia  (Global Times)

08:41, September 06, 2012

Chinese banks' rapid expansion of their assets in the first half of the year amid the current economic gloom might cause loan repayment problems and undermine their solvency, Fitch Ratings said in a report released Tuesday.

Despite the deteriorating economy, Chinese banks have continued to expand their balance sheets rapidly, with system assets rising 11.9 percent in the first six months of the year, the report said.

The assets of China's banking sector will exceed $21 trillion by the end of this year if Chinese banks continue to expand their assets at the same pace, much higher than $9 trillion at the end of 2008, the report said.

The report attributed the expansion of assets in the first half to the rapid growth of interbank borrowing, which rose 29 percent from January to June, compared with a rise in corporate and retail credit of 9 percent. Many interbank assets are actually corporate credit disguised as interbank claims, the report said.

"We have long held the view that such aggressive expansion at a time of weak global and domestic economic fundamentals has the potential to lead to large loan repayment problems, and could ultimately undermine solvency," it said.

"Banks' desire to boost their assets has never waned, due to rising capital demand as evidenced by the recent large-scale local government investment projects," Song Guoliang, a finance professor at the University of International Business and Economics, told the Global Times.

"It creates risk, and bad loans are likely to increase if the economy continues the current downward trend," he said.

While the economy has yet to touch bottom, the report forecast that banks' balance sheets and earnings would deteriorate in the second half of 2012 and first half of 2013, which might lead to a downgrading of some banks' ratings.

Interim reports released by major Chinese banks in recent weeks have already indicated that their earnings and asset quality were declining.

Industrial and Commercial Bank of China (ICBC), the world's biggest lender by market value, reported net profit of 123 billion yuan ($19.37 billion) for the first half of 2012, up 13 percent from the same period in 2011 but a slower rate of growth than the 29 percent rise in the same period last year, the bank said last week.

ICBC's overdue loans reached 62.05 billion yuan as of June 30, up 7 percent from the end of last year.

"Banks' profitability will continue to decline as a result of the two interest rate cuts early this year and a reduction in fees from intermediary business," Lian Ping, chief economist of the Bank of Communications, told the Global Times.

News we recommend:
Amusement parks boost real estate market Survey shows SOE jobs are top choice CNOOC pushes ahead with Nexen acquisition
The Pain of a Pension Deficit Staying on Target More new grads opt for State firms
Treading Lightly for Fast Growth  Questions raised over stores' price war A fertile ground for overseas banks


Leave your comment0 comments

  1. Name


Selections for you

  1. Soldiers take part in military training in Hohhot

  2. Kim Jong Un, wife visit working people's flats

  3. Development of China's industrial economy in past decade

  4. Performance during 2nd China-Eurasia Expo

  5. 'Bride stealing' custom all the rage in Bucharest

  6. American beauty

Most Popular


  1. Obama's absence triggers unfit US-Russia reset
  2. Export fixation behind declining PMI
  3. A lesson learned about attractiveness
  4. Hainan's island idyll needs military guard
  5. Editorial: Non-manufacturing PMI
  6. Territorial clash makes Japan upgrade diplomacy
  7. HK national education controversy highly politicized
  8. Commentary: A special relationship indeed
  9. Chinese firms exposed to malicious IPR allegations
  10. Obama's 'forward agenda' hard to garner support

What's happening in China

Strict health check-up for air stewardesses

  1. China allows cultivated ginseng in food
  2. Fight forces flight to return
  3. Collapse at construction site injures workers
  4. Counterfeit fossils undermine research projects
  5. No promotional labels to be allowed on baby formula

China Features

  1. 17 fairylands you must go in your life
  2. PR veteran: To know China is to know the future
  3. Chinese books gains worldwide popularity
  4. 'City in wonderland’ appears after rain
  5. Chinese investment good for the host nations

PD Online Data

  1. Ministry of Water Resources
  2. Ministry of Railways
  3. People's Bank of China
  4. Ministry of Health
  5. Ministry of Culture