SHANGHAI, Dec 15 (Reuters) – Chinese banks could see their home loan bad debt ratio more than double by the end of 2021 from mid-year, S&P Global Ratings said, as headwinds in Chinese real estate intensified in the second. half.
The non-performing loan ratio (NPL) of real estate loans at Chinese banks may rise to 5.5% by year-end from 2.5% in mid-2021 and 2% by the end of 2020, the S&P said in a statement. research note on Wednesday.
Tensions in real estate, where about a third of developers are estimated to be in financial trouble, will also contribute about 20 basis points to the overall NPL ratio of 1.75% by 2021, the S&P said, which could dilute profitability of lenders.
Banks with an aggressive risk appetite or high geographic concentration could be left with thinner collateral buffers and are therefore likely to experience greater stress, S&P said.
China’s banking and insurance regulator has repeatedly warned of persistent pressure on banks for non-performing assets, with non-performing loans in the banking sector of 3.6 trillion yuan at the end of September.
Some lenders have recently adjusted their lending practices to reflect the latest central bank guidance to “meet normal financial needs” for the sector, while the authorities have yet to give any public signal that they will relax the “three red lines”: they were introduced Financial requirements by the central bank last year that developers must meet to obtain new bank loans.
“The key policy direction remains unchanged,” said S&P, which expected zero growth in real estate development loans in 2022 and modest growth during 2023 and 2024.
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