Chinese banks' bad loans at record high

The non-performing loans (NPLs) of China's commercial banks reached 539.5 billion yuan ($88 billion) at the end of the second quarter, hitting a record high since the second quarter of 2009, reflecting the difficulties facing firms amid a weak economy, official data showed Wednesday.

By the end of June, banks saw an increase of 13 billion yuan in NPLs from the first quarter, taking the NPLs to a record high in 17 quarters. However, the ratio of NPLs to the total outstanding loans was 0.96 percent, flat with the first quarter of this year due to the amount of new loans granted, according to data from the China Banking Regulatory Commission.

The NPLs of joint-stock banks and city-level commercial banks rose faster than the large State-owned banks in the second quarter compared with the first three months, official data showed.

Ten provincial-level regions including Shanghai , East China's Jiangsu and Zhejiang provinces saw the fastest increase in the NPLs in the first half of the year, Shang Fulin, chairman of the CBRC, said at a meeting on July 31.

New NPLs in East China's Zhejiang, Jiangsu and Shandong provinces amounted to 31 billion yuan in the first half of the year, taking 67 percent of all NPLs incurred during the same period.

The rise of the NPLs is closely related to the economic slowdown, especially in the ­regions which are most affected by the slower pace of ­economic growth, An ­Zhanqiang, vice president of Beijing Unbank Investment Consultant Ltd, told the Global Times on Wednesday.

The rise in NPLs is ­attributed to ailing small businesses and steel traders which rely ­heavily on credit in these regions, which is why the new NPLs of joint-stock and city-level ­commercial banks that often target non-State-backed smaller firms are higher than their large counterparts.

Solar energy and shipping industries are also affected due to sluggish demand both at home and abroad, according to media reports.

The official figure might ­underestimate the real ­situation of bad debts as banks tended to recognize less loans overdue as bad debts, Jin Lin, a banking analyst at Orient Securities, told the Global Times on Wednesday.

"But the bad debts are not ­expected to pose systemic risks," Jin said, noting that some of the overdue loans will be repaid in the second half.

The net profit of commercial banks hit 753.1 billion yuan in the first half of this year, up 13.83 percent from a year ago, according to the CBRC.