Chinese banks fear credit risks in industries withovercapacity - survey

Almaty. January 27. Silkroadnews – The greatest credit risk that Chinese banks faced in 2015 was related to the loans toindustries mired in overcapacity, according to a survey released, China Daily informs.
According to a survey jointly released on Sunday by the China Banking Association andPwC, 82.1 percent of bankers said the primary credit risk of their banks remained in theindustries with excess capacity, including the industries of iron, steel, cement, andshipping, while 57.6 percent considered the risk of loans to small and micro enterprises asthe primary credit risk.
Ba Shusong, chief economist of the association and project leader of the survey, said morethan 40 percent of the bankers expect that the non-performing loan ratio will standbetween one percent and three percent in the next three years, signifying that riskmanagement has become the top priority of the banking sector.
Statistics from the China Banking Regulatory Commission show that the NPL ratio forcommercial lenders jumped 43 basis points year-on-year to 1.59 percent at the end ofSeptember. The outstanding NPLs were 1.19 trillion yuan ($181 billion), up 55 percentfrom a year earlier.
Wu Weijun, chief partner of PwC Beijing, advised commercial banks to draw as much loanloss provisions as possible to fend off future risks.
Polling 1,328 bankers from 116 financial institutions nationwide, the survey found that82.3 percent of the bankers said China's liberalization of interest rates was the primarymarket risk they faced in 2015, which was followed by the increase of capital marketvolatility (55.6 percent), the uncertainty of timing and range of adjustments to China'smonetary policy (51.6 percent), and the widening of two-way fluctuations of renminbiexchange rates (50.1 percent).
The survey found that 67 percent of the bankers favor supporting city infrastructure themost, followed by the medical industry, information technology services andtransportation. Restrictive credit policies applied to metallurgical, real estate, papermaking, textile and ship-building industries.
The survey showed that the bankers are not optimistic about their profit earning efficiencyin the coming three years, with 60 percent expecting an annual profit growth at less than10 percent.
About 30 percent of those who participated in the survey listed the growth of banks'intermediary business and the increase of interest-bearing assets respectively as the factorthat will make the largest contribution to the banks' profit growth.
According to the survey, banks will keep pushing forward strategic transitions to deal withincreasingly intensified competitions. Nearly 80 percent of the bankers care most abouthow to deepen the features of their banks and differentiate their business from others.
Around half of the surveyed bankers said they will increase investment in the Internetfinance.