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Chinese banking majors including Bank of Communications (BOCOM), China Merchants Bank (CMB), China Construction Bank (CCB) and Bank East Asia (BEA) have reported an increase in non-performing loans (NPLs), impacted by China’s property market crisis. BOCOM’s NPLs increased by $821mn to $14.4bn in H1 2023 vs. end-2022. Its NPL rate regarding their exposure to the property sector rose by 0.59% to 3.39%. Similarly, CMB’s NPLs increase by $360mn to $8.3bn during the same period and its NPL rate regarding the sector rose 1.44% to 5.52%. Along the same lines, CCB’s loans to the real estate sector rose 8.1% since end-2022 with its bad-loan exposure to the sector jumping 18% to $5.4bn. Only last week, Goldman Sachs forecasted that the property sector distress could trigger over $260bn in credit losses, based on a 10% loss rate. They noted that at end-June 2022, the banking sector accounted for 75% of debts owed by property developers totaling $2.65tn.
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