Coronavirus News Asia

China bank NPLs alarm, Buffett buys spurs Nikkei

Hong Kong: Investors turned cautious after China’s biggest banks said they are setting aside more funds to provide for future losses due to the impact of the coronavirus pandemic. Chinese banks’ non-performing loans ratio is already running at the highest since 2009 and they have already posted a 9.4% drop in net profit in the first half of the year.

This took away some of the optimism stoked by positive data from the world’s second largest economy which showed China’s manufacturing PMI was in positive territory for the sixth consecutive month.

China’s CSI300 index eased 0.58%, Hong Kong’s Hang Seng benchmark fell 0.96% and Australia’s S&P ASX 200 dipped 0.22%.

“In the worst case, China banks could be guided to reduce profit by c.20-25% in 2020. Further reduction would hurt banks’ capital even without any dividend payout and would be harmful to financial stability,” Shujin Chen and Alfred He, banking analysts at Jefferies & Co, said.

Moody’s analysts said they expected a considerable lag time before NPL metrics fully capture the increase in loan delinquency. Asset pressure will remain high as consumer sentiment stays weak amid a slow recovery from the pandemic.

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