China Sees Increase in Bad Loans

Chinese banks had the biggest quarterly increase in bad loans since 2005 as a slowdown in the world’s second-largest economy causes defaults to rise.

Nonperforming loans rose by 54 billion yuan ($8.7 billion) in the three months through March to 646.1 billion yuan, the highest level since September 2008, according to data released by the China Banking Regulatory Commission yesterday. Bad loans accounted for 1.04 percent of total lending, up from 1 percent three months earlier.

The 10th straight quarterly increase in defaults adds to concern banks’ profitability may slip as they build buffers to cover loan losses. Policy makers have also been cracking down on financing to weaker borrowers to rein in total debt that has climbed to more than double the nation’s gross domestic product.

Bloomberg

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