Some of China's largest banks are set to post their first drop in first-half profits since the global financial crisis, hit by a surge in bad debt and higher loan-loss provisions due to the coronavirus pandemic, analysts and official data indicate.
“Banks had it easy in the past, but now many signs indicate they’re under great pressure,” said Hong Hao, head of research at BoCom International. “The pandemic has hit small businesses hard ... the balance sheets won’t be pretty.”
The banking regulator has asked some state lenders to fully recognise bad loans on balance sheets and increase buffers for covering souring debt in the first half of the year, which will weigh on profits, two bankers from one of the lenders told Reuters. In recent state media interviews, CBIRC chairman Guo Shuqing urged banks to set aside more cash as loan-loss buffers, and come up with “realistic” profit plans.
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