BEA's impaired loan ratio climbs to 0.38%

Due to credit quality deterioration outside Hong Kong.

According to Bernstein Research, the bank's credit quality exhibited some minor deterioration as its impaired loan ratio climbed by 6bp HoH to 0.38% (the bank's NPL ratio has been on a downward trend since H1 '09, with this half marking the second uptick since then).

Meanwhile, BEA's overdue loan ratio ticked up by 5bp sequentially to 0.24% during the half.

Here's more from Bernstein:

The increase in impaired loan ratio was due to credit quality deterioration outside Hong Kong (largely in China and other Asian countries). BEA China's impaired loan ratio increased by 10bp to 0.40% while it nearly doubled in its other Asian countries (from 0.22% at the end of 2012 to 0.41% at the end of H1 2013). In Hong Kong, BEA HK's NPL ratio remained nearly flat HoH, rising just 2bp to 0.23%.

BEA's management guided that the majority of its NPL formation in China occurred among small-andmedium-sized enterprises in the Zhejiang province and Fujian province. They also flagged crossguaranteed loans as a problem as they confirmed that most impaired loan formation was tied to loans that used cross-guarantees as a means of credit enhancement.