- Joined
- Mar 12, 2009
- Messages
- 13,160
- Points
- 0
Fitch warns China banks face big "bubble risk"
Posted: 03 February 2010 1458 hrs
SHANGHAI: Fitch Ratings warned Wednesday that banks in China face the greatest "bubble risk" of any Asian country, one day after it downgraded two mid-sized Chinese banks due to the rising threat of bad credit.
The agency's comments in an Asia-wide assessment of the banking sector come as concerns mount that Chinese banks may be headed for trouble over bad debt after a record lending spree last year.
"The agency views "bubble risk" as greatest for Chinese banks given their 32 per cent loan growth in 2009; this looks likely to be followed by a further 20 per cent in 2010," Fitch said in a statement.
"Credit growth of more than 50 per cent over a two-year period in an economy where bank credit is already quite large relative to gross domestic product almost inevitably involves some misallocation of credit," it added.
New loans extended by China's banks nearly doubled in 2009 from the previous year to 9.6 trillion yuan (US$1.4 trillion) as banks heeded Beijing's calls to pump up lending to keep the economy growing.
Fitch, however, noted the limited transparency of Chinese banks and said their tendency to reschedule loans meant any bad debt problems would surface slowly.
"Chinese banks are less well-placed, compared with Asian peers, to deal with potential problems given that rapid loan growth is weakening capital ratios that are already relatively low," Fitch said.
On Tuesday, Fitch downgraded China Merchants Bank and China CITIC Bank to 'D' from 'C/D' given "both banks' noticeable deterioration in capital and rising on and off-balance-sheet credit risk in the wake of last year's very rapid loan growth."
"All Chinese banks have come under strain to some degree over the past year, but the weakening in financial performance has been most striking at CMB and CNCB," said Beijing-based Fitch analyst Charlene Chu.
Last year's lending spree has triggered fears that excess liquidity is fuelling inflation and feeding asset bubbles.
China last month increased the minimum amount of money that banks must keep in reserve and took other steps that analysts said were aimed at curbing lending amid fears of rising bad loans.
- AFP/sc
Posted: 03 February 2010 1458 hrs
SHANGHAI: Fitch Ratings warned Wednesday that banks in China face the greatest "bubble risk" of any Asian country, one day after it downgraded two mid-sized Chinese banks due to the rising threat of bad credit.
The agency's comments in an Asia-wide assessment of the banking sector come as concerns mount that Chinese banks may be headed for trouble over bad debt after a record lending spree last year.
"The agency views "bubble risk" as greatest for Chinese banks given their 32 per cent loan growth in 2009; this looks likely to be followed by a further 20 per cent in 2010," Fitch said in a statement.
"Credit growth of more than 50 per cent over a two-year period in an economy where bank credit is already quite large relative to gross domestic product almost inevitably involves some misallocation of credit," it added.
New loans extended by China's banks nearly doubled in 2009 from the previous year to 9.6 trillion yuan (US$1.4 trillion) as banks heeded Beijing's calls to pump up lending to keep the economy growing.
Fitch, however, noted the limited transparency of Chinese banks and said their tendency to reschedule loans meant any bad debt problems would surface slowly.
"Chinese banks are less well-placed, compared with Asian peers, to deal with potential problems given that rapid loan growth is weakening capital ratios that are already relatively low," Fitch said.
On Tuesday, Fitch downgraded China Merchants Bank and China CITIC Bank to 'D' from 'C/D' given "both banks' noticeable deterioration in capital and rising on and off-balance-sheet credit risk in the wake of last year's very rapid loan growth."
"All Chinese banks have come under strain to some degree over the past year, but the weakening in financial performance has been most striking at CMB and CNCB," said Beijing-based Fitch analyst Charlene Chu.
Last year's lending spree has triggered fears that excess liquidity is fuelling inflation and feeding asset bubbles.
China last month increased the minimum amount of money that banks must keep in reserve and took other steps that analysts said were aimed at curbing lending amid fears of rising bad loans.
- AFP/sc
