Banker data reveals how prepared China’s banks are for impaired loan losses.
Some Chinese banks are reportedly lobbying regulators to relax requirements to put aside provisions equal to 150% of their non-performing loans (NPLs). While NPLs are the major point of contention in PRC authorities’ crackdown on China’s bad loan problem, the broader category of impaired loans also warrants attention.
The 2015 financial report of Industrial and Commercial Bank of China, the world’s biggest lender, contains no clear disclosure of impaired loan provisions. But data collected by The Banker on China’s next five biggest lenders reveals how much they have set aside for impaired loans (those for which the contractual cashflow is not expect to be fully collected or not collected when due).
Agricultural Bank of China is the most prudent in provisioning for these losses. At the end of 2015 its loan impairment provisions equalled 73.26% of its gross impaired loans that same year. This contrasts with its NPL ratio which, at 2.39% at year-end 2015, is the highest among China’s big five lenders.
Next is Bank of China which has provisions covering 63.83% of its impaired loans, followed by China Construction Bank (56.02%). After them are Bank of Communications (52.25%) and China Merchants Bank (47.32%).
For Bank of China, China Construction Bank and China Merchants Bank these figures are between 1.73% and 3.99% lower than in 2014. However, Bank of Communications’ provisions as a percentage of impaired loans are up 0.3%
All data is consolidated at bank holding company level and sourced from www.thebankerdatabase.com
