China major banks see bad loans decline
(AP)
Updated: 2006-01-18 15:23

Nonperforming loans at China's major commercial banks fell by 498.5 billion yuan (US$61.8 billion; euro51 billion) in 2005, reducing their share of total lending by 4 percentage points, the official Xinhua News Agency reported Wednesday.

The report, citing an unnamed official at the China Banking Regulatory Commission, comes as efforts step up to restructure state-owned lenders ahead of a full opening of China's financial services markets to foreign competition at the end of this year.

Major banks, as defined by the banking regulator, include both state-owned and joint stockholding banks, but exclude credit cooperatives -- known to have much high portfolios of bad debts, and foreign banks, the report said.

The report did not provide total dollar figures for the amount of nonperforming loans or total loans at major banks. According to earlier-released data from the commission, by the end of 2004, the banks had total nonperforming loans worth 1.718 trillion yuan (US$212.9 billion; euro177 billion), accounting for 13.21 percent of total lending.

International analysts have put the actual amount of irrecoverable loans at a much higher level, although massive state-financed write-offs and bailouts have helped to trim them from their peak a few years ago of as much as half of all lending.

Total assets in China's banking system reached 37 trillion yuan (US$4.6 trillion; euro3.8 trillion) by the end of 2005, up 18.4 percent from a year earlier, the report said without providing comparative figures.

The report said 40 banks had met the regulator's capital adequacy ratio requirement of 8 percent by the year's end, an increase of 10 from the end of 2004.

On Tuesday, the Agricultural Bank of China, the third-largest but weakest of the country's four big state-owned commercial banks, said it hopes to finish restructuring this year but has yet to receive a government decision on a bailout.

The government has spent a total US$60 billion (euro50 billion) to replenish capital at the other big state banks -- the Bank of China, Industrial and Commercial Bank of China and China Construction Bank.

"We have gotten in line, we're the last and still waiting for a decision," Han Zhongqi, vice president of the Agricultural Bank, told reporters. "The restructuring won't be as fast as the other banks and our problems are larger."

The Agricultural Bank was set up to lend to rural projects and businesses and thus has a wider exposure to bad debts, with its nonperforming loan ratio at 26 percent of total lending at the end of 2005, down just 0.51 percentage point from the beginning of the year.