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 a cooling economy.
Bad debts at Industrial & Commercial Bank of China Ltd. (1398), China Construction Bank Corp. (939), Agricultural Bank (1288) of China Ltd. and Bank of China Ltd. (3988) rose 3.5 percent in the third quarter to a combined 329.4 billion yuan ($54 billion), data compiled from earnings reports shows. Profit rose to 209 billion yuan while their average bad-loan ratio widened to 1.02 percent.
The rise in defaults adds to concern bank profitability may slip as policy makers trim output at cement plants to paper makers that have gorged on credit since 2008, while urging lenders to build buffers to cover loan losses. China’s biggest banks are trading near record-low valuations as investors brace for a surge in defaults, and ICBC fell in Hong Kong today.