China’s top four banks posted their biggest increase in soured loans since at least 2010 as a five-year credit spree left companies with excess manufacturing capacity and slower profit growth amid an economic slowdown.
Nonperforming loans at Industrial & Commercial Bank of China Ltd. (601398), China Construction Bank Corp. (939), Agricultural Bank (1288) of China Ltd. and Bank of China Ltd. (3988) rose 3.5 percent in the three months to Sept. 30 from June to a combined 329.4 billion yuan ($54 billion), according to data compiled by Bloomberg News based on third-quarter results. Profit rose to 209 billion yuan.
The rise in defaults adds to concerns bank profitability may decline as policy makers seek to trim production at cement makers to paper manufacturers that have gorged on credit since 2008, while urging lenders to build buffers to cover loan losses. China’s biggest state-run banks are trading near record-low valuations as investors brace for a surge in bad debts and slower credit growth.
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