Chinese commercial banks’ asset quality to remain stable

BEIJING — Chinese commercial banks’ asset quality will maintain its overall stability, with the bad loan ratio predicted to stay below 1.9 percent, according to a report released by the financial research center of Bank of Communications.

With accelerating economic restructuring and an improving financing environment for private and small businesses, commercial banks will see less downward pressure on asset quality, the report said.

In addition, higher profitability will enable lenders to do more to deal with bad loans and reduce financial risks, according to the report.

The bad loan ratio of Chinese commercial banks stood at 1.87 percent by the end of the third quarter, 0.01 percentage points higher than at the end of Q2.

Despite the slight increase in the ratio, the amount of new bad loans dropped markedly and the banks’ provision coverage ratio, which measures how lenders are protected against bad loans, went up, the report said.

Meanwhile, it warned of risks of negative impact on banks’ asset quality from certain sources, including property developers with high debt ratios, local governments’ hidden debts and corporate bond defaults.