PwC Highlights Five Areas of Challenge and Opportunity for Chinese Banks

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A new report on the Chinese banking sector from international consulting firm Pricewaterhouse Coopers (PwC) has identified five key areas of “challenge and opportunity” for lenders in the remainder of 2020.

Zhu Yu (朱宇), PwC managing partner, said that in the second half of 2020 Chinese banks would need to focus on challenges and opportunites in five key areas including:

  1. Targeted guidance of loosened lending policies;
  2. Deeper reform of small and medium-sized banks, as well as the availability of multiple channels for shoring up capital strength;
  3. The “closing year” for the prevention and dissolution of major financial risk, and a marked tightening of regulatory vigour;
  4. A shift in wealth management business models during the transitional period for new asset management regulations;
  5. Opportunities provided by COVID-19 to accelerate digital transformation.

The “Banking Sector Rapid Report: 2020 Semi-annual Chinese Banking Sector Review and Outlook” (银行业快讯:2020年半年度中国银行业回顾与展望) released by PwC on 23 September said that the COVID-19 pandemic has already had a heavy impact on Chinese listed lenders, and that overall processing fee and commission revenues were seeing decelerating growth as a consequence.

China’s listed banks saw net profits of 901.052 billion yuan in the first half of 2020, for a YoY decline of 9.05%.

Under conditions of loosened monetary policy listed Chinese banks were also seeing rapid growth in their balance sheets.

Total assets stood at 212.71 trillion yuan as of the end of June, for a rise of 7.65%, while total liabilities were 195.95 trillion yuan, for an increase of 7.74%, as compared to increases of 5.88% and 5.95% respectively for the same period last year.

Zhu Yu said that most listed banks had seen marked increases in their non-performing loan ratios, and that in future there would continue to be heavy pressure on asset quality.

As of the end of June the non-performing loan sum for listed Chinese banks was 1.74 trillion yuan, for a rise of 10.19% compared to the end of last year, while the overdue loan sum was 1.91 trillion yuan, for a rise of 4.50%.

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