Chinese banks face fresh wave of massive defaults

Big Four triple debt write-offs as hedge. China’s largest banks have tripled the amount of bad loans written off in the first half. Industrial & Commercial Bank of China Ltd, China’s largest bank and the world’s most profitable, and its four largest rivals wrote-off US$3.65 billion in uncollectible debt compared to US$1.26 billion on-year. Analysts said erasing the worst of the bad debts could allow banks to withstand a coming surge in nonperforming loan ratios caused by rising defaults in China. The country has relaxed rules for writing off debt to small businesses since 2010. The China Banking Regulatory Commission in April asked banks to set aside more funds to cover defaults, write off some bad loans and curb dividend payments. China’s five biggest banks reported a US$3.68 billion increase in NPLs during H1 to reach a total of US$57 billion or 1% of total loans, said Bloomberg. They added US$13.6 billion to funds set aside as bad debt provisions compared to US$11.97 billion in the first half of 2012. ICBC abandoned efforts to reclaim payments on US$1.7 billion of bad loans in H1 or more than double the US$408 million on-year. The Big Four banks are ICBC, China Construction Bank Corporation, Agricultural Bank of China Ltd and Bank of China Ltd. Bank of Communications Company is the fifth largest bank. ABF NEWS