China’s Bank of Communications Holds Back Tide of Bad Loans

  • Nonperforming loan ratio stays unchanged; overdue credit falls
  • China’s fifth-biggest bank warns that credit risks persist

Bank of Communications Co., China’s fifth-largest lender, held back a tide of bad debt in the second quarter but executives cautioned that it was too early to say that the worst was over.

Nonperforming loans amounted to 1.54 percent of total credit, the same as in the previous three months, the lender said in Shanghai on Thursday.

Investors are monitoring Chinese banks’ second-quarter earnings for any signs that the industry is getting on top of its bad loans, estimated by analysts to be much higher than the levels officially reported.

Loans overdue for more than 90 days fell 6.6 percent from six months earlier to 85.4 billion yuan ($12.8 billion), the first decline since 2011, based on half-yearly data.

While bad-debt risks are “controllable,” the situation remains severe, President Peng Chun said at a briefing. Yang Dongping, the chief risk officer, said that nonperforming loans were rising faster in some places -- such as Shandong, Tianjin and Fujian -- than others.

Bank of Communications’s “special mention” loans, a term for credit in danger of going bad, stood at 3.07 percent of total credit, down from 3.17 percent six months earlier.

Separately on Thursday, the bank said its board had approved previously-reported plans to list an investment-banking arm in Hong Kong.

The bank’s net income for the three months through June 30 increased 1.3 percent from a year earlier to 18.6 billion yuan, according to quarterly figures derived from the first-half statement. That was close to the 18.4 billion yuan median of four analysts’ estimates compiled by Bloomberg.

— With assistance by Alfred Liu, and Jun Luo

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