Initial manifestation of deterioration signal of asset quality of Chinese commercial Bank

After the rapid expansion of loan scale in the first half of this year, commercial banks are facing the risk caused by all parties concerned. China's banking sector, which has withstood the test of the international financial crisis, has significantly increased credit exposures and concerns about the medium-term outlook for asset quality, according to a report by Fitch Ratings (Fitch), one of the world's three biggest rating agencies.　　Some Chinese banks face downward pressure on individual ratings. "There have been particularly many cases involving banks recently. This may have something to do with local government transitions and loose money. Shanghai's regulatory authorities are under great pressure.　　People familiar with the matter told the Chinese Securities News reporter. At the beginning of the risk, a local bank in Shanghai recently appeared a loan of more than billion. "The Sub-branch president himself in the outside to do the project, is not a pure real estate development, as if the project of construction projects, the results were loan, the specific details unknown, the investigation has been involved." All aspects have been given notice to block the news. The relevant personage tells a reporter.　　The person also disclosed that the amount of the problem loan was nearly 200 million yuan, and the bank's Shing even stalled. According to people familiar with the matter, recent banking cases have continued after the media disclosed that tens of two of millions of bank deposits were moved.　　The risk of initial exposure may have far-reaching implications for the future development of the bank. On the one hand, strong loan growth in the short term will lead to a significant drop in non-performing loan rates, Fitch said in a recent report.　　On the other hand, Chinese banks have great latitude in dealing with collateral or secured loan classifications, and the impact of non-performing loans will take a long time to be reflected in the data. In fact, while the main asset quality indicators of Chinese banks have continued to improve, the migration rate of the interest-type loans to non-performing loans has risen markedly. For example, in the current period of non-performing loan write-off adjusted net increment and the previous period of concern loan balance ratio, Minsheng Bank 07 is 13.5%, 08 is 32.5%; Citic Bank 07 0, 08 12.6%; Pudong Bank 07 2.8%, 08 10.33%　　Shanghai Bank 07 was 3.3%, 08 was 9.3%. The increase in non-performing loans of foreign banks operating in China and the expected loss of the non-value-reduction loans of domestic listed banks ...　　These, Fitch believes, are early warning signs that the quality of China's banking assets is not optimistic. Given the early signs of deterioration in asset quality, the authorities have asked banks to adopt more aggressive provisioning measures, such as 150% per cent of the provision coverage. And in order to allow the risk to be set up to cover 100% of non-performing loans and 50% of the focus on loans required to increase the proportion of the bank's 2008 pre-tax profit ratio, Huaxia Bank for 122.6%, Shenzhen Development Bank for 89.9%, Shanghai Bank for 71.6%, Bank of China for 61.9%.　　It can be seen that many banks only use a large part of their 08-year profit to cover their risks adequately. Mid-term concerns Ma, chief economist for Greater China, Deutsche Bank, said that urban fixed asset investment increased year-on-year in May this yearThe rate soared to 39% (33% in January-May), which was not seen for 10 years. Funding for new projects started in May rose by 108% per cent year-on-year.　　Ma analysis, from the past more than 10 years of monthly data, fixed asset investment growth of about 40% or more to increase the risk of economic fluctuations. Fitch Ratings believe that the risk of the Chinese banking sector is rooted in the fact that banks are shouldering the task of boosting growth by boosting credit, and that recent credit levels seem to be far beyond the scope of fiscal stimulus.　　In the medium term, this will lead to two of concerns: exposure to companies rises when corporate earnings decline, and the oversupply of credit funds can lead to a collapse in loan profits. China's banking industry lacks experience in a complete business cycle. Most of China's banking data began in 2003, when economic growth was strong. "The expected loss model based on imperfect historical data may lead to significant, systemic credit risk undervaluation."　　Fitch Ratings. Therefore, Fitch ratings to Chinese banks, the individual rating is relatively low, the individual rating reflects the bank's financial strength evaluation. China Merchants Bank and Citic Bank, with the highest rating in the mainland, also have only a DS rating, indicating that banks ' profitability is neutral or weak.