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Banking & finance
BusinessBanking & Finance

Bank of Communications, China Merchants Bank report increasing bad loans amid property crisis

  • ‘The situation of controlling the risks from the property sector remains serious,’ a Bank of Communications spokesperson says
  • Banks could face 1.2 trillion yuan (US$153 billion) in credit losses, according to Goldman Sachs analysts

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A Bank of Communications location in Beijing, pictured on May 22, 2023. Photo: Simon Song
Yulu Ao
Two major Chinese banks reported a growing number of non-performing loans (NPLs) on their books in the first half of the year as China’s worsening property-market crisis puts increasing strain on lenders.
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Both Bank of Communications, China’s sixth-largest commercial bank in terms of assets, and China Merchants Bank reported rising NPLs, joining China Construction Bank (CCB) and Bank of East Asia, which issued similar reports on Thursday.

Bank of Communications on Friday evening reported its NPLs increased by 6.44 billion yuan (US$821 million) to 104.96 billion yuan in the first half compared with the end of 2022. The lender’s bad loan rate for loans exposed to the real estate industry rose by 0.59 percentage points to 3.39 per cent in the corresponding period.

“We have noticed rising risks from the property sector ... and the situation of controlling the risks from the property sector remains serious,” a spokesperson from the bank said in a briefing. Though the sector is on the way to a gradual recovery, some developers are still in the process of fighting against the risks, the spokesperson said.

“Amid the sophisticated and challenging international environment, [the] domestic economy is facing new difficulties and challenges,” the bank said in an exchange filing. “The fundamentals sustaining China’s sound economic growth in the long run stay unchanged.”

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