Caixin has a good summary for 14 of the Chinese banks which have recently reported their first half results. According to the report, overdue loans have increased 6.35% at the end of the first half compared with the end of last year. Out of 14 banks, only 3 banks did not report rising overdue loans, and out of the remaining 11 banks, 8 of them reported more than a 10% increase in overdue loans, and most of them seem to have arisen in the recent 3 months. The banks which top the league of rising overdue loans are Bank of Ningbo, Minsheng Bank, Pudong Development Bank and China Everbright Bank, with 31.97%, 24.71%, 22.19% and 17.87% increases of overdue loans respectively.
Minsheng Bank has more information on the surge in overdue loans. The surge started in the second quarter, and was concentrated in corporate loans, retail loans and credit card businesses. In the corporate loans segment, overdue loans increased by RMB750 million, with a large proportion of them happened in real estate and manufacturing sectors. In the retail businesses, overdue loans increased by RMB700 million mainly due to the increase in interest rates.
While it is not by itself something which should raise the red flag, this is still worthy of note. In particular, the increase in overdue loans in the real estate sector (if this is true for other banks as well) highlights the difficulties real estate developers are currently facing amid credit tightening as well as aggressive administrative curbs in home prices and speculations, which led to slow transaction volumes in various cities and ever higher inventories levels.
As the government seems determined to curb home prices via a tightening stance on monetary front, small and medium sized businesses and real estate developers will continue to feel the pressure. Together with the slowdown in the developed world, the view here is that the situation both for the economy and banks does not look overly bright. Real estate developers, in particular, will be squeeze further going forward and will most likely be forced to cut prices, and that will probably set off more corrections in the real estate sector, eventually hurting the broader economy.