Asian Conversations - an online magazine to explore Asia's future

Don't bank on bad loans

CHINA's four biggest state-owned commercial banks are racking up bad loans - and the trend is on an upswing. At end June 2017, the big four - ICBC (Industrial and Commercial Bank of China), ABC (Agricultural Bank of China), BOC (Bank of China) and CCB (China Construction Bank) - had just under US$112 billion in 'impaired loans' - a climb up of 4.6% year on year.

Standard & Poor's points to weaknesses in the Indian banking system too with bad loans climbing to an estimated 15% of all loans by the end of the first quarter in 2018.

Bad loans continue to plague a range of countries from Italy and the EU as a whole (estimated as up to US$1.3 trillion), to Africa, a chronic offender.

Says KPMG, "European lenders are battling to cut soured loans as they face evaporating income from lending amid negative interest rates from the European Central Bank. Net interest margins, the difference between income from lending versus cost of funding, average about 1.2 percent in the region compared with about 3 percent in the U.S., according to KPMG."

Bloomberg's Africa analysis adds, "Bank failures in Kenya at the end of 2015 and early 2016, coupled with a government decision in August to cap commercial lending rates, resulted in a 'very turbulent' operating environment in the country last year...” – AC