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Sept. 1, 2014, 1:27 a.m. EDT

China state banks report surge in soured loans

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By Grace Zhu


Shutterstock/pcruciatti

BEIJING — China’s biggest state-owned banks reported a surge in soured and castoff loans in the first half, as China’s slowing growth takes a toll on its lenders.

The five biggest state-owned banks — Industrial & Commercial Bank of China Ltd. /zigman2/quotes/201401473/delayed HK:1398 +1.00%   /zigman2/quotes/202525815/delayed CN:601398 +1.95%   /zigman2/quotes/204265987/delayed IDCBF -2.40% , China Construction Bank Corp. /zigman2/quotes/208974133/delayed HK:939 +1.46%   /zigman2/quotes/208058581/delayed CN:601939 +2.08%   /zigman2/quotes/209484779/delayed CICHF -1.92% , Agricultural Bank of China Ltd. /zigman2/quotes/200705246/delayed HK:1288 +0.33%   /zigman2/quotes/204629388/delayed CN:601288 +1.25%   /zigman2/quotes/209398792/delayed ACGBF +1.27% , Bank of China Ltd. /zigman2/quotes/204682472/delayed HK:3988 +0.96%   /zigman2/quotes/209359942/delayed CN:601988 +0.61%   /zigman2/quotes/201568493/delayed BACHY +1.00%  and Bank of Communications Co. /zigman2/quotes/203442771/delayed HK:3328 +1.58%   /zigman2/quotes/207155262/delayed CN:601328 +1.86%   /zigman2/quotes/208048873/delayed BKFCF 0.00%  — wrote off and transferred out of their books a total of 46.91 billion yuan ($7.64 billion) of bad loans in the first half, according to calculations by The Wall Street Journal.

That is more than twice the 22.07 billion yuan from a year earlier and marks an effort to clean up their books amid the prospects of more bad loans.

The five lenders also reported a total of 423.49 billion yuan of nonperforming loans outstanding at the end of June, up 21% from a year earlier. They also reported a slowdown in profit growth.

Bad-loan levels within China’s banking industry remain low in terms of total portfolios. Still, the level is expected to creep upward as cooling economic growth hampers borrowers’ ability to repay debts.

An expanded version of this report appears on WSJ.com.

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