3 years after Evergrande crisis, China’s key banks struggle to cap property risk exposure

China’s systemically important banks are still grappling with high levels of bad assets in their property loan portfolios, as the ongoing real estate downturn continues to drag the country’s efforts to stabilise the national economy and fend off financial risks.

Banks are faced with an elevated non-performing loans (NPLs) ratio – an indicator of a bank’s asset quality and credit risks – in the property sector, with a median NPL ratio of 2.79 per cent among the top 18 banks, according to the Post’s review of their midyear financial reports.

The average property-related bad loan ratio across China’s “big four” state-owned banks – the Industrial and Commercial Bank of China (ICBC), the Agricultural Bank of China, Bank of China and the China Construction Bank – was 5.2 per cent.

It marked a slight fall from 5.5 per cent at the end of last year, but remained high compared to the overall average NPL ratio of 1.56 per cent at the end of June.

The big four banks, which account for most of China’s bad property loans, are on the list of “global systemically important banks” by the Bank for International Settlements.

Specifically, the Agricultural Bank of China reported the highest NPL ratio in the real estate sector, standing at 5.42 per cent. The ICBC, China’s largest by asset size, registered a NPL ratio of 5.35 per cent.