Chinese banks face double threat of more bad debt, lower margins amid worsening coronavirus pandemic
- Chinese banks, now closely integrated into global supply chains, could be affected if outbreak is not contained by third quarter, China Construction Bank says
- Non-performing loan pressure to worsen during second quarter and second half of this year: analyst
After posting better-than-expected results for 2019, Chinese banks face the prospect of worsening asset quality and pressure on profits this year, as the coronavirus pandemic takes a toll on the global economy, bankers and analysts said.
With the pandemic now having spread to more than 200 countries and claiming more than 52,000 lives, bankers said they expected a bigger impact on China’s economy. Since the country plays an outsize role in the global supply chain, its banks are likely to take a hit should the global economy contract this year, which seems like a real possibility, they said.
“If the global coronavirus is not contained by the third quarter, this will have a great impact on the Chinese economy [and] on Chinese banks,” Zhang Gengsheng, executive vice-president of China Construction Bank (CCB), said during a teleconference held this week to discuss the bank’s annual results.
The deadly virus, which causes the Covid-19 respiratory disease, brought most of China’s economy to a halt in late January and February after authorities took measures to contain the outbreak. This has already translated into more overdue loans and a drop in growth in new customers, especially for banks’ credit card and retail loan businesses, bank officials said.
