Bad Loans Mostly Concentrated in the Mining Industry in the First Half of the Year
Yicai Global
/SOURCE : Yicai
Bad Loans Mostly Concentrated in the Mining Industry in the First Half of the Year

(Yicai Global) Sept. 02 -- Mid-term performance reports released by listed banks show that these banks' bad loans cluster in the same industries, such as the manufacturing, wholesale and retail and mining, in terms of public loans, personal business loans and retail loans. Among all these, the mining industry sees the most bad loans.

On the bad loan trend in the second half, most senior bank managers believe that the situation will still remain severe, with the rate of bad loans continuing upward. However, only the chief risk officer of China Construction Bank [SH:601939]holds an upbeat view. Zeng Jianhua, the CRO, believes that although bad loans in the next few years will stay at high levels, the worst had already passed as of the end of last year.

Mid-term performance reports issued by 16 listed banks indicate that bad loans mostly concentrate in the mining industry and many banks see their increase in bad loans higher in mining than other industries. Of these, China Minsheng Bank [SH: 600016] ranks first with a bad loan increase of 319.25 percentage points, and the rate for China Merchants Bank [SH:600036] and Ping An Bank [SZ:000001] also reached 78.66 percent and 76.69 percent, respectively.

In addition, the bad loan rate of Nanjing Bank [SH:601009] in the mining industry topped 18.77 percent in the year's first half.

In regions with many incidents of bad loans, the deterioration of credit quality in the Yangtze River Delta -- a developed region in eastern China -- is almost under control. Many banks in this region have recorded negative growth in the year's first half, with China Everbright Bank [SH: 601818] registering 18.41 percent -- the biggest rate of decrease of all the banks.

Yet the Pearl River Delta, a vital region in China, still faces a severe situation. Aside from China Citic Bank [SH: 601998], which has seen 25.7 percent negative growth, other listed banks in the Pearl River Delta have seen a rapid increase in bad loans, e.g. the bad loan increase rate of China Everbright Bank branches in the region hit 42 percent.

Western China has now become the most affected region in terms of bad loans and the increase rate of bad loans of China Merchants Bank touched 56.16 percent in the region.

Faced with this grave situation, all the banks have strengthened their efforts to liquidate bad loans. According to incomplete statistics collected by journalists from Yicai Global, Industrial and Commercial Bank of China [SH:601398], Bank of China [SH:601988] and Bank of Communications [SH:601328] liquidated and cancelled bad loans worth CNY210 billion in the first half of this year.

Aside from the traditional means of liquidation, restructuring and credit assignment, some banks are planning to explore the securitization and assignment of bad loans in the second half of the year.

For example, Industrial Bank [SH:601166] is planning to set up pilots to carry out the securitization and the assignment of bad loans, and China Construction Bank plans to issue bad loan securitization products in September.

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