Despite a drop in their non-performing loan ratio in 2007, banks should not be complacent because they face stiff challenges ahead, Jiang Dingzhi, vice chairman of the China Banking Regulatory Commission, told executives from the big lenders.
BEIJING (Reuters) - China's banking regulator on Thursday warned big lenders of the risks of lending to real estate developers and highly polluting or energy-intensive firms, ordering them to step up controls to prevent a rebound in bad loans.
Despite a drop in their non-performing loan ratio in 2007, banks should not be complacent because they face stiff challenges ahead, Jiang Dingzhi, vice chairman of the China Banking Regulatory Commission, told executives from the big lenders.
"Banks should carefully implement the government's macro control policies and effectively prevent various dangers," he said, according to the watchdog's Web site.
As well as singling out property developers and industries that consume a lot of energy and cause pollution, Jiang told banks to keep a close eye on manufacturers with obsolete plants and firms whose loans are guaranteed by local governments.
!ADVERTISEMENT!Highlighting the risks of real estate lending, figures from the Shanghai banking regulator show 2 billion yuan in property loans went sour in 2007, twice as much as in 2006, according to state media.
More than one quarter of the new loans extended by domestic banks in Shanghai last year went to real estate, and by the end of 2007 the sector accounted for about 32 percent of their outstanding loans, the 21st Century Herald reported on Thursday.
The National Audit Office issued a separate warning that banks were lending too much to finance road construction -- their exposure was 800 billion yuan at the end of 2005.
Owing to the bad management of some roads and insufficient toll collections, many banks were finding it hard to get paid back, state media said.
The bank regulator said the four banks among the Big Five that are listed on the stock market had an average NPL ratio of 2.87 percent in 2007, down from 3.60 percent a year earlier.
The four are Industrial and Commercial Bank of China, China Construction Bank, Bank of China and Bank of Communications.
The quartet improved their return on assets to 1.11 percent in 2007 from 0.88 percent in 2006.
The other member of the Big Five, Agricultural Bank of China, is still burdened by a high NPL ratio because the state has yet to carve out its bad loans and recapitalize the bank.
Including AgBank, the five largest banks had a NPL ratio of 8.05 percent at the end of 2007, down 0.55 percentage point from a year earlier.
(Reporting by Eadie Chen; Editing by Alan Wheatley)
