ICBC Chairman Says Decline in Asset Quality Milder Than Expected

  • President had warned in August bank may have to drop NPL goal
  • Chinese banks' bad loans rose to seven-year high in September

The head of Industrial & Commercial Bank of China Ltd., the world’s largest lender by assets, said bad debts were rising at a slower pace than expected.

The risk of asset quality deteriorating remains controllable, Chairman Jiang Jianqing said in an interview Thursday at the World Economic Forum in Davos, Switzerland, without giving more details.

Jiang Jianqing
Jiang Jianqing
Photographer: Matthew Lloyd/Bloomberg

Jiang’s comments on asset quality come after the bank’s President Yi Huiman indicated in August the lender may have to abandon a target of keeping its nonperforming-loan ratio at 1.45 percent by the end of 2015. It stood at 1.44 percent as of Sept. 30.

Chinese banks’ bad loans had risen to a seven-year high of 1.2 trillion yuan ($182 billion) by September, according to data from the industry regulator, as defaults spread from small private firms to state-owned enterprises. Policy makers have set guidelines to clean up “zombie companies” that rely on government subsidies and bank loans, and are also seeking to restructure unprofitable SOEs in industries with excess capacity.

ICBC’s overseas business is expanding as planned, and its foreign operations accounted for about 10 percent of total assets at the end of last year, Jiang said.

China’s biggest lenders are accelerating their international expansion plans as the country creates a global network of offshore banks to promote the yuan as a reserve currency at a time when the weakening domestic economy is threatening profitability. ICBC, with more than $3.5 trillion in assets, has spent over $10 billion on overseas acquisitions since 2008 as it expanded in countries from Myanmar and Cambodia to Luxembourg and the U.K.

Separately, Jiang said the bank is still awaiting detailed rules from the government allowing banks to hold brokerage licenses. He said the bank is still studying its options.

— With assistance by Jun Luo, and Aipeng Soo

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