Asset Quality of Chinese Banks Holds Steady at End of Q3, Profits Fall 8.3% YoY

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The latest official data indicates that China’s banking sector is holding up well in the wake of the COVID-19 pandemic.

As of the end of the third quarter the non-performing loan (NPL) balance of Chinese commercial banks was 2.84 trillion yuan for an increase of 98.7 billion yuan during the quarter, according to data released by the China Banking and Insurance Regulatory Commission (CBIRC) on 10 November.

The NPL ratio of Chinese commercial banks was 1.96%, for an increase of 0.02 percentage points compared to the end of the preceding quarter.

During the first three quarters of 2020 the net profits of Chinese commercial banks totalled 1.5 trillion yuan, for a YoY decline of 8.3% The average return on capital was 10.05%, while the average return on assets was 0.80%, for a decline of 0.02 percentage points compared to the end of the preceding quarter.

The loan loss reserve balance of Chinese commercial banks was 5.1 trillion yuan as of the end of the third quarter, for an increase of 108.6 billion yuan compared to the end of the second quarter, while the provisions coverage ratio was 179.9%, for a decline of 2.52 percentage points. The loan provisions ratio was 3.53%, for a decline of 0.01 percentage points compared to the end of the preceding quarter.

As of the end of the third quarter the core tier-1 capital adequacy ratio of Chinese commercial banks was 10.44%, for a decline of 0.02 percentage points compared to the end of Q2. The tier-1 capital adequacy ratio was 11.67%, for an increase of 0.07 percentage points, and the capital adequacy ratio was 14.41%, for an increase of 0.20 percentage points.

The liquidity coverage ratio was 138.67%, for a decline of 3.79 percentage points, and the liquidity ratio was 58.63%, for a rise of 0.44 percentage points.

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