Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

China banks seek new lending horizons as bad debts rise

Stock Markets Aug 31, 2014 06:10PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters A man is silhouetted in front of a Bank of China's logo at its branch office in Beijing 2/2
 
1398
+2.79%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
601988
+1.31%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
1288
+1.73%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
601288
+1.42%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
601328
+0.87%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
601398
+0.46%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Engen Tham and Lawrence White SHANGHAI/HONG KONG (Reuters) - Grappling with a slowing economy, China's biggest banks are turning their back on mainstay borrowers like manufacturers and courting high growth industries such as healthcare, food and IT in a bid to boost revenue.

The shift in focus by the state-owned lenders coincides with a spike in non-performing loans and slower profit growth as China's vast factory sector flounders.

For the first half of this year, the banks reported an increase in bad loans from the Yangtze delta, the country's main export-focused manufacturing belt, as well as the Bohai industrial rim.

China's biggest bank, the Industrial and Commercial Bank of China (HK:1398) (SS:601398), also said 80 percent of new non-performing loans in the second quarter came from manufacturing and wholesale.

Several lenders said they expect bad loans to continue rising this year, especially from creditors in the steel, wholesale and shipping sectors. The Agricultural Bank of China (SS:601288) (HK:1288), for example, said it had cut loans to customers in steel making and ship building by almost 39 billion yuan ($6.4 billion).

Loan officers at several banks told Reuters they were no longer working on sectors like shipping and commodities, focusing instead on high-growth areas like health and technology.

Other bankers said they would look to generate more revenue from asset management, trust lending and financial leasing.

Some banks, like Bank of China (BoC) (SS:601988) (HK:3988), were also looking to extend loans to domestic clients through their overseas branches to capitalize on higher interest margins.

"We'll make our own risk assessments on a case-by-case basis, but healthcare and high-tech electronics will be a focus," said a senior BoC loan officer.

"As lending conditions continue to tighten domestically, we're also helping our borrowers seek better terms abroad," he added. BoC said loans at its overseas branches rose almost 40 percent year-on-year at the end of the second quarter to 262 billion yuan.

The banks' efforts to diversify their borrowers could be hampered by the government, which uses these lenders as a means of directing credit to struggling industries and stimulating growth when the economy is struggling.

But with the level of bad loans as of June at its highest since 2011, the government may give lenders more autonomy.

"Misdirected lending is the biggest bane of banking, because it might lead to credit losses and ultimately they'll have to write off those losses," said Roshan Francis Padamadan, who manages $2.1 million for investors in the Luminance Global Fund.

(Editing by Miral Fahmy)

China banks seek new lending horizons as bad debts rise
 

Related Articles

Qomolangma Acquisition Corp. IPO Prices at $10
Qomolangma Acquisition Corp. IPO Prices at $10 By Investing.com - Sep 30, 2022

Qomolangma Acquisition Corp., a Delaware corporation (QOMOU) announced today that it priced its initial public offering of 5,000,000 units at $10.00 per unit. The Company’s units...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email