BEIJING, Mar 1: Chinese banks kept their bad loan ratios steady in the fourth quarter of last year while slightly improving their capital strength, official data showed on Friday, chiming with a mild recovery in the broader economy.
Chinese banks’ non-performing loan ratio was 0.95 percent at the end of 2012, unchanged from the end of October, the China Banking Regulatory Commission (CBRC) said on Friday.
The weighted average capital adequacy ratio (CAR), meanwhile, increased to 13.3 percent at the end of 2012 from 13.0 percent at the end of October, the CBRC said in a statement on its website, www.Cbrc.Gov.Cn
The latest data may help ease worries about a surge of bad loans in the wake of China’s 2012 economic slowdown, as improving economic activity since September and a rebound in the property market reduce delinquency risks for lenders.
China’s economy snapped out of a seven-quarter-long slowdown and started to pick up in the fourth quarter at a pace of 7.9 percent, though the 2012 annual pace of growth at 7.8 percent was the weakest showing in 13 years.
The bank watchdog said the average loan-to-deposit ratio was 65.3 percent at the end of 2012, largely unchanged from the number at the end of the third quarter last year.
Chinese banks’ loan-to-deposit ratio (LDR) is now capped at 75 percent and designed to tie lending closely to the level of deposits, providing a stable source of capital for credit creation and reducing bank exposure to short-term funding and leverage risks.
Too tight a cap constrains the ability of banks to lend, a particular problem in China where most enterprises still rely heavily on bank lending to finance businesses and investment.
Chinese banks issued a total of 8.2 trillion yuan ($1.32 trillion) in local currency loans in 2012 and the figure is expected to reach 8.5 trillion yuan this year.
The CBRC requires major lenders to maintain a minimum CAR of 11.5 percent. Other banks need a minimum CAR of 10.5 percent.
In general, a higher capital adequacy ratio is seen as good for the financial system as lenders have more cash to cover the cost of unforeseen risks, benefiting depositors. The downside for investors is that a high ratio could crimp profitability.
(AGENCIES)
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