BANKS on China's mainland reduced their exposures to bad loans in the third quarter of this year as they boosted risk controls amid the global financial turmoil, the industry regulator said yesterday.
The average non-performing loan ratio at banks on the mainland was 5.49 percent by the end of September, compared with 5.58 percent as of June 30, according to the China Banking Regulatory Commission.
The bad-loan ratio was also down 0.67 percentage points from the start of this year and the total sour debt at banks on the mainland declined 3.02 billion yuan to 1.27 trillion yuan (US$187 billion) by September 30, the CBRC said.
Banks on the mainland include the five biggest state-owned banks, national joint-stock lenders, city commercial banks, rural banks and foreign lenders.
Mainland banks have moved in the past few years to contain risks as China reined in credit to avoid overheating and curb inflation. But as monetary policies are being loosened to spur growth, some analysts warn that bad loans may rise.
"Apparently, domestic banks have enhanced their risk control systems," said Wu Ke, a Zhongtian Investment Consulting Co analyst. "But the question is whether the improvement is good enough to counter the financial crisis and slower economic growth."
The bad-loan ratio at the big five - the Industrial and Commercial Bank of China, China Construction Bank, the Bank of China, the Agricultural Bank of China and the Bank of Communications - dropped to 7.35 percent by September 30 from 7.43 percent as of June 30.
Smaller national joint-stock banks saw their average non-performing loan ratio decline to 1.59 percent from 1.65 percent a quarter earlier while that of city commercial lenders to 2.54 percent from 2.72 percent by the end of June.
But the bad-loan ratio of rural banks increased to 4.44 percent by the end of September from 3.26 percent a quarter before while that for foreign banks on the mainland was unchanged at 0.5 percent.
China has been encouraging banks to extend loans to rural areas as part of the country's efforts to boost economic growth and bolster people's living standards.
"Lending to rural areas doesn't necessarily mean an increase in bad loans. If banks shore up risk controls, they can also make a profit," Wu said.