(ECNS) -- Chinese commercial banks are experiencing rising bad loan ratios, spurring the establishment of local asset management companies (AMCs) eager to tap new business opportunities, the Economic Information Daily reported on Thursday.
By May 18, ten local banking watchdogs had announced first-quarter banking industry data. While banks in Shandong, Zhejiang and Ningbo all saw their non-performing loan (NPL) ratios in excess of two percent for the quarter, banks in Jilin registered a NPL ratio as high as 3.53 percent, although that represented a decrease from the previous quarter.
Provincial and even city or prefecture-level AMCs have flocked into the market amid increasing regional financial risk, the paper said. In the past half year, local AMCs in the provinces of Hunan, Jiangxi and Shanxi, as well as in the city of Qingdao, have been officially set up or given the approval of regulators to launch, it said.
So far, 23 local "bad banks" have entered the market for the disposal of bad assets, especially non-performing financial assets, according to the report. Shareholders of these "bad banks" include local state-owned enterprises and private companies, as well as China's Big Four AMCs – China Great Wall, China Cinda, China Huarong and China Orient.
Data from Shandong's banking regulator show that the province's banking sector posted 131.61 billion yuan in NPLs at the end of the first quarter.
Ji Yulu, the general manager of Shandong Financial Asset Management Corp, told the paper that Shandong banks have seen rising NPL ratios in recent years and that more than 200 billion yuan in assets are on the brink of disaster. The company has acquired bad assets totaling 51.2 billion yuan and disposed of 7.36 billion yuan-worth since its launch in March 2015, he added.
Ji said his company mainly targets Shandong's rural credit cooperatives, city commercial banks and small lending firms. "Among the remaining 43.8 billion yuan of bad assets waiting for disposal, 80 percent came from local institutions," he said.
Owing to policy restrictions, local "bad banks" are mainly engaged in the restructuring of bad assets and reclaimable arrearages management, rather than transfers of assets, the paper said.
Ji said local AMCs have forged a cooperative ecosystem that involves banks, government and local financial institutions.
Chen Yong, the vice president of Anhui Guohou Asset Management Co, also said his company is initiating a fund that will involve private capital in the disposal of bad assets.
