[ET Net News Agency, 17 July 2019] Moody's Investors Service explains in a report that
asset growth for banks in China quickened to 8.7% in 1Q 2019 from the year before, driven
by the Chinese regulators' push for more lending to privately-owned companies, including
micro and small enterprises. In particular, loans grew by 13.8%, outpacing the 3.5% growth
in non-loan assets.
"We expect that the regulators will maintain their broad policy objective of
safeguarding financial stability, but implement initiatives at a measured pace, given the
more challenging macroeconomic environment," said Nicholas Zhu, a Moody's Vice President.
Moody's said that during 1Q 2019, the banks' asset quality stabilized, with the
systemwide nonperforming loan (NPL) ratio largely flat, while the banks continued to
dispose of their NPLs. The special mention loan ratio - a leading indicator of asset
quality - also declined.
However, NPL ratios edged up by nine basis points for a smaller city and rural
commercial banks.
As for capitalization, the banks' core Tier 1 capital adequacy ratio softened by four
basis points to 10.95%, in line with their faster asset growth. Growth of risk-weighted
assets rebounded during 1Q 2019 from a deceleration in the previous period. And, issuance
of capital securities remained robust.
On profitability, the system's annualized return on assets averaged 1.02% in the first
quarter of 2019, three basis points lower than for 1Q 2018. High credit costs will keep
profitability subdued in 2019.
With liquidity, Moody's said the banks' liquidity is adequate to maintain asset
refinancing. Moody's points out, for instance, that the central bank has supported system
liquidity by lowering the required reserve ratio (RRR) for around 1,000 smaller rural
commercial banks in May, after cutting the RRR for all banks by one percentage point in
January 2019. (KL)