The profitability of Chinese commercial banks was hit hard by the Communist Party’s viral Epidemic, achieving net profit of CNY 1,939.2 billion for the year 2020, a 2.7% year-on-year decline in net profit and the first negative annual growth since the Communist Party’s regulatory release of statistics (in the fourth quarter of 2010).
Reuters reported on Feb. 9 that after disposing of a record number of non-performing assets last year, China’s commercial banks ended the year with a non-performing ratio down only slightly by 2 basis points year-on-year. Communist Party financial regulators and industry insiders expect the bad debt situation for banks to remain tough going forward.
A major state-owned bank source said, “Asset quality pressure is one of the key risks facing banks this year.”
The person said that last year, in order to mitigate the impact of the Communist Party’s viral epidemic on small and medium-sized enterprises, Communist Party policy makers introduced a policy of deferring debt service and made banks give up to 1.5 trillion yuan to entities, “which relatively shifted the risk to banks.”
The source expects that after the policy expires and is phased out this year, non-performing loans will “bubble up in large numbers.”
Xiao Yuanqi, chief risk officer of the Communist Party of China (CPC) Banking and Insurance Regulatory Commission, told a conference at the State Council Office last month that the situation of non-performing bank loans is still relatively grim, and potential non-performing loans may increase.
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