Credit scale dilution non-performing rate S & S cautious optimism 09 new loan quality

The 1.53 trillion data on new loans in June caused a variety of market worries.　　July 13, S & P noted that bank credit growth of 7.5 trillion yuan in the first half may lead to higher credit risk and potentially undesirable trends in asset quality. "The average quality of new loans this year was weaker than in the same period last year," said Standard Poole.　　Of the 1.53 trillion new loans that were added in June, the industry, agriculture, central and construction of the four banks accounted for 496.7 billion yuan, accounting for 32.02%, compared with more than 50% in the first quarter, meaning that small and medium-sized banks accelerated credit growth in 5-June. Liao, a financial analyst for S & P, said in an interview that the Chinese banking system should be able to withstand the undesirable trend of asset quality, but the bank credit situation may be differentiated. "The projects supported by the centrally supported and financially relatively affluent provinces are of good quality, with big banks having a larger market share but a small number of quality projects, so big banks do not necessarily perform better than mid-sized banks in terms of loan quality." "NPL will not rise" big banks are not necessarily better at asset quality control than mid-sized banks, and we understand that many joint-stock banks were cautious this 1-April loans.　　"Liao said.　　While the rapid rise in new lending has raised concerns about the quality of banks ' assets, but Liao said that because of the size of the loan, non-performing loan ratio (NPL) will be diluted, so this year's domestic banks NPL not only will not rise, there will be a fall in the possibility of non-performing loans will not be in the next 12-18 months of huge growth.　　The level of bad loans in 2009 and 2010 is expected to fall further, under control, because strong credit growth gives companies ample liquidity, but with the gradual decline in lending and the eventual suspension of loans by banks, there is still a risk of a rise in non-performing rates. "As domestic firms have an average debt rate of more than 50% per cent, which is much higher than the mature market, NPL is likely to rise sharply if the economy continues to slow or fall."　　Liao said the agency predicts GDP growth of 6.5% per cent this year, followed by a sustained recovery. According to the benchmark stress test, the credit costs of China's banks in 2009-2010 (that is, the ratio of new credit provisioning costs to average loan balances) were as high as 1.38%, 0.91% and 0.6% respectively. On average, the system is able to digest increased credit costs, and for banks with rising industry or regional concentration, such as policy banks and grassroots banking institutions, including rural credit cooperatives, the potential credit losses will seriously hit their already lower-than-average profitability,　　This could lead to further differentiation of industry credit conditions.　　As for whether the central bank will issue additional bills to absorb market liquidity, Tsang, a financial analyst, said that the central government's concern over the economic downturn is still greater than the fear of deflation, so tightening measures remain premature. Inflation risk looms over the first half of this year, and the agency believes that, in addition to the Government's strong image of banksOutside, domestic banks are also happy to provide further financing support to cash-poor borrowers, who see the dilemma as short-term and self-correcting as China's economic growth picks up. In addition, in the context of current interest rate controls, banks may be able to offset the effects of a narrowing of net spreads by lending.　　China's banking sector had a 66.19% loan-to-deposit ratio at the end of last year, and many Chinese banks still have ample room for deleveraging.　　Another possibility, says the agency, is that banks may require quality clients to extract more money than they need, artificially increasing loan growth data, either to raise the level of loan balances reported or to minimise the impact of balance sheets or to maintain flexibility in the future. Liao said credit growth would slow in the second half of the year, with growth of more than 30% per cent in the first half and demand for corporate loans to be met.　　The slowdown in loan growth in the second half of the year may affect the overall level of profitability, but if the impact of the credit cost factor on the average asset return is considered, the profitability of the bank will not necessarily be affected. The rapid growth of loans in the first half of the year is expected to test the risk management system that banks have just developed that could expose fraudulent cases in the coming years. But the biggest macroeconomic risk facing banks is inflationary pressures. Historically, inflation will emerge after lending has grown more than 20%, compared with a year-on-year increase of about 30% per cent in late June.