China Banking Monitor

Summary

Bank assets growth picked up to 7.7% in Q3 2019 supported by a higher loan growth rate. Assets quality worsened and diverged among big and smaller banks. Capital adequacy ratio dropped on faster growth in risk-weighted assets, small banks are facing deteriorating conditions in funding through NCDs and bond market.

Key points

• Key points:
• Credit growth slumped in October weighed by weak corporate demand coupled with seasonal effects, reflecting that the efforts to funnel credit to the real economy are showing little success.
• Bank assets growth picked up to 7.7% in the first three quarters supported by a higher loan growth rate.
• Asset quality deteriorated in the Q3 2019 as banks report a higher non-performing loan ratio. Asset quality diverged among big and smaller banks on a stricter standard of NPLs recognition.
• Banks’ net profit growth and net interest margin (NIM) picked up as banks shift to relatively high-yield retail credit from interbank activities coupled with a lower wholesale funding cost.
• Banks interconnectedness with the shadow banking system has further decreased.

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