Standard & Poor’s warns that China’s banking industry may double its real estate non-performing loan rate in the second half of the year

Standard & Poor’s Global Ratings stated that due to the intensified difficulties of the Chinese real estate industry in the second half of the year, by the end of 2021, the real estate non-performing loan rate of the Chinese banking industry may more than double from the middle of this year.

A research report released by Standard & Poor’s on Wednesday stated that the real estate non-performing loan ratio of China’s banking industry was 2.5% in mid-2021, 2% at the end of 2020, and may rise to 5.5% by the end of 2021.

Standard & Poor’s stated that the real estate industry is under pressure. It is estimated that about one-third of developers are in financial trouble. This will also increase the overall non-performing loan ratio by about 20 basis points in 2021, which may weaken the profitability of banks.

S&P believes that banks with active risk appetite or a high degree of geographic concentration may have weaker collateral buffers and therefore will be under greater pressure.

The China Banking and Insurance Regulatory Commission has repeatedly warned that the pressure of non-performing assets on banks has always existed. At the end of September, the balance of non-performing loans in the banking industry was 3.6 trillion yuan.

“The key policy directions remain unchanged,” S&P said, and expects zero growth in real estate development loans in 2022, and small increases in 2023 and 2024.

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