Bank survey shows bankers worried about credit risks

Eighty percent of Chinese bankers polled in a survey said the greatest pressure the Chinese banking sector faced last year was the prevention and control of credit risks and the containment of non-performing assets.

According to a survey jointly released on Sunday by the China Banking Association and PwC, 82.1 percent of bankers said the primary credit risk of their banks remained in the industries with excess capacity, including the industries of iron, steel, cement, and shipping, while 57.6 percent considered the risk of loans to small and micro enterprises as the primary credit risk.

Ba Shusong, chief economist of the association and project leader of the survey, said more than 40 percent of the bankers expect that the non-performing loan ratio will stand between one percent and three percent in the next three years, signifying that risk management has become the top priority of the banking sector.

Statistics from the China Banking Regulatory Commission show that the NPL ratio for commercial lenders jumped 43 basis points year-on-year to 1.59 percent at the end of September. The outstanding NPLs were 1.19 trillion yuan ($181 billion), up 55 percent from a year earlier.

Wu Weijun, chief partner of PwC Beijing, advised commercial banks to draw as much loan loss provisions as possible to fend off future risks.

Polling 1,328 bankers from 116 financial institutions nationwide, the survey found that 82.3 percent of the bankers said China's liberalization of interest rates was the primary market risk they faced in 2015, which was followed by the increase of capital market volatility (55.6 percent), the uncertainty of timing and range of adjustments to China's monetary policy (51.6 percent), and the widening of two-way fluctuations of renminbi exchange rates (50.1 percent).

The majority of bankers expect the growth of operating revenues and profit after tax will drop to single digits for Chinese banks in the next three years. About 30 percent of those who participated in the survey listed the growth of banks' intermediary business and the increase of interest-bearing assets respectively as the factor that will make the largest contribution to the banks' profit growth.

According to the survey, banks will keep pushing forward strategic transitions to deal with increasingly intensified competitions. Nearly 80 percent of the bankers care most about how to deepen the features of their banks and differentiate their business from others.