Zhang Xiaoyan  People's Bank of ChinaFinancial Research Institute

 

20Century90In the late21At the beginning of the century, China banks have loan quality is very bad period, when many banks non-performing loan rate of more than25%, some banks even reached30%,40%. People will then banks of bad loans accumulated due to the banks undertake policy sex business, weak internal control, risk management, inefficient. In the process of reform, Chinese banking non-performing loan ratio continued to decline, asset quality gradually improved.

 

Arrived2008At the end of the year, for the first time China banking non-performing loan ratio dropped to5%The following, as2.42%. Prompted the banks' asset quality generally promote include risk management capability of government support, regulatory pressure, improvement of banking, a favorable macroeconomic environment and improve enterprise performance. From the2009At the beginning of the year, Chinese banking non-performing loan ratio continued to decline.

 

By2012The first quarter of this year, non-performing loan ratio dropped to0.9%, this is a very low level, the future is difficult to continue to decline in the space. People can not help asking such a low rate of bad loans can be maintained? Whether a true reflection of the current Chinese banking loan quality? The future will not be bad loans rebound? Particularly important to these problems in the current macro economic growth rate slowed down the background.

 

The pro cyclical characteristics of periodicity and non-performing loans of banks credit behavior

 

The formation of non-performing loans in general there are two kinds of Views: one is that bad loans originated from the managers of their own reasons (such as excessive pursuit of short-term interests, poor management etc.). Another view, the bank non-performing loans arising under the influence of the external environment to a great extent, such as economic cycles and bank area economic development level and credit status, therefore the non-performing loan is mainly caused by the "bad luck", bank managers have limited impact on the. No matter what kind of view, bank credit Shun non-performing loans periodic change periodically and the resulting has been widely accepted, namely the size of bank credit and economic cycles are positively correlated, while the rate of bad loans and economic cycle negative correlation. The economy is in the rising period, enhance the solvency of enterprises, household wealth increases, rising asset prices to reduce the rate of increase in the size of bank credit, asset quality improved, non-performing loans; on the contrary, the economic downturn, the contraction of bank credit, deterioration in the quality of assets, non-performing loan rate of climb.

 

In Chinese, the reality is, since the2003Since the bank joint-stock reform, China economy has maintained rapid growth rate, Chinese banks did not experience a complete economic cycle, the rate of bad loans Chinese banking and balance of non-performing loans has continued to decline, even in2008,2009During the financial crisis the most serious period did not rebound.

 

From the2004Years, China nameGross domestic productThe quarterly growth rate,CPIThe relationship between banks, loan growth rate and the rate of bad loans in the banking sector (here the loan growth rate and the rate of bad loans is measured by nominal value, so this paper chooses the nameGross domestic productThe same quarter growth rate reflects China fluctuations in the economic cycle). From the2004Years, Chinese banking non-performing loan ratio has been in a state of decline, did not appear periodic fluctuation.

 

The above phenomenon is explained Chinese banking loan growth and loan quality does not have a cyclical fluctuations? That is not the case. Banks in2009Years and2012Rapid loan growth in the first quarter and falling non-performing loan ratio and cannot be an evidence China banking assets quality is very good, instead makes people worry about the banking system has accumulated a large number of potential bad debts. In the2010Years, governments and regulators to realize the potential threat of this explosive growth of credit, policy control prices, credit control are introduced. "Slam the brakes" results are appearing on the market a lack of liquidity, the private lending market in a variety of issues. Experienced2010Years and2011Two years after the regulation,2012Years China economy once again encountered difficulties.

 

 

Between loan growth and loan time lag

 

The quality of loans are past lending behavior results, it China, analysis of the current loan quality must be considered non conventional loan growth over the past few years.

 

Bank current actions affect loan quality data published, because although the non-performing loan is past behavior results, but reflects the non-performing loans (NPL ratio index) can be disguised by present behavior.

 

If banks were honest, two kinds of behavior will hide the deterioration of bank asset quality:

 

1In the loose monetary policy under the credit, banks by increasing the number of loans, to amplify the denominator, to reduce the rate of bad loans;

 

2By changing the conditions of the loan, reflecting off bad loans on their books, the hope for the future economy to solve the problem, such as the extension of the loan term, loan or allow a borrower to borrow new also old etc..

 

Although the periodic characteristics of non-performing loans is not obvious in the China, but in the economic downturn, the government is more likely to force banks to relax credit standards, increase credit to help the economy, this will delay the reflection of bad loans in the banking book. Therefore, the impact of government policies will make the bad loan problem is more complex.

 

For example, a marked decline trend in the macro economy, the government will allow the slowing economy, promote the adjustment of industrial structure, or again by stimulating investment to prevent the economy from falling too far, in order to solve the problems in the development, all these have great uncertainty. In any case, from the view of current government policy, the government seems to hope at the same time, in order to achieve two goals, which means that the government can allow the economy to a certain extent slow down, but also through the expansion of investment and other measures to avoid economic change radically.

 

Therefore, Chinese economy may appear mild recession, this will affect the quality of bank lending behavior and. Bank loans will continue to increase, which makes the2009Years of excessive lending is beginning to. If the bank does not have the loan or borrow new also old, some bad loans at this time should be reflected in bank accounts. Therefore, we analyzed from the2007Years to2012Years1Quarter, quantity, the lending bank loan growth, the bad loan five grades classification index.

 

Since the2004Years, the size of the loan Chinese banking increased year by year, from2004The first quarter of this year not to13Trillion yuan up to2009In the first quarter of nearly27Trillion yuan. Get into2009Years, the rapid growth of bank loans in the fourth quarter, year-on-year growth rate of close to36%, far higher than the same periodGross domestic productGrowth rate. In the2010Years and2011Years, China banking loan growth has declined, but still in the20%Fluctuate, this phenomenon continued to2011In the fourth quarter, withGross domestic productThe decline in the growth rate of bank loans, quarter year-on-year growth rate dropped to less than14%. But the bank loan growth in the2012Years seems to be a rising trend, as2012The first quarter of this year, China banking loans has been close to49Trillion yuan.

 

Quality of ultra conventional growth in bank lending will make people doubt the bank loans, due to the expansion of the size of the loan in the short term, in addition to external economic factors of economic growth, monetary policy and other factors, many banks will also play a role in. To increase the loan, the bank can cut interest rates or relax credit standards, or at the same time by these two methods.

 

In three cases, bank loans will have a negative impact on the overall bank asset quality:

 

1To have rejected the borrower lending.

 

2For new customers or set up not long customer lending.

 

3The risk of bank required loan interest rate or the value of the mortgaged property and the bear does not match,Such as the low credit rating of customers give preferential interest rate loans, the value of loan collateral ratio under the condition of fixed overestimated the value of the mortgaged property or the borrower investigate whether there are enough cash flow to pay the loan is not strict etc..

 

Increase in bank loans this active behavior will eventually lead to increasing loan losses.As we are in the20Century90In the early 1990s as experienced, bank industry downturn will not only threaten the bank itself, but also because banks are unwilling to extend new loans and slowing economic growth.

 

Because of the bad loan appeared to spend time, initial loan growth may be the result of a decline in the rate of bad loans.But the experience of many countries show,Long term effects of rapid loan growth is the inevitable rise in the rate of bad loans. Many bankers experience shows that, in the year will not be issued loans after default, most appeared early in second or third years will default, usually in loans after third year loan losses will reach the maximum.

 

History shows that, in Chinese banking loans rapid growth at the same time, Chinese banking non-performing loans that are on the decline from the absolute number and relative number, especially in2008After a year in the fourth quarter, non-performing loan ratio dropped to2%The following, and continue to maintain a state of decline. If the deterioration in loan growth and loan quality time lag for China banking,2009Years banking non-performing loan ratio reflects the should be2007Quality and previous loans, but also affected by the rapid growth in loans non-performing loan rate of dilution unit.

 

Corresponding.2008Quality year loan in2010The rate of bad loans years, and2009Years and2010The rapid growth in loans to negative affect the quality of loans should be embodied in the2011Years later, the rate of bad loans. But from the Chinese banking non-performing loan ratio data,2011Years since the bank's non-performing loan ratio is still very low, even down to the1%Here, have no room to decline.

 

Although the banks to expand lending behavior can reduce the rate of bad loans, but not to reduce non-performing loans, which indicates that the secondary, doubtful and loss class loan non-performing loans may not be able to fully describe the definition of bank asset quality, we should also analyze the five tier classification of normal and concerned about two types of loans in in particular, such loans are the focus of consideration. But the problem is, so the CBRC data do not reflect the normal and concerned about two types of loans,, the relevant data of five large banks are analyzed.

 

 

Analysis of five large banks non-performing loans

 

In the five level classification, classified as "substandard, doubtful and loss class loan" is called "bad loans". These three types of loans, there are a lot of problems, have a higher probability of default. But not classified as non-performing loans "concerned" loans also contains the potential vulnerability, if not to solve related problems of words, concerned about the type of loan quality will deteriorate, because"Borrow new also old, or through other financing means to repay the loans" also statistics on loan.

 

In addition,Many banks will be the principal or interest on overdue90Days of loans are also included in the category of concerned loan. For the overdue loans, banks may extend or other financing, usually the first extension or refinance loans are classified as such loans (some very easy bank credit policy may be classified as normal loans, bank credit policy more stringent classification for the secondary loan), second case of extension or refinancing loans will be included in the "subprime" loans. This means not in the maturity of loan can before being included in the non-performing loans for a period of time.

 

At present, most banks do not publish China extension of loans and refinancing loan information, so we can only from the loans and overdue loans analysis.

 

Many experience shows that, when the total loan quality deteriorated in, overdue loans and non-performing loans should be the same change trend. But the domestic bank is the emergence of a strange phenomenon:

 

From the2010Year,The overdue loans of the banks and the SMLS slowly began to increase, but the rate of bad loans has been declining,In spite of the2010Years of bad loans rose slightly. Five banks in2011At the end of the year the balance of loans reached nearly28Trillion yuan of bad loans, but only3165Billion yuan, the average non-performing loan rate of only five banks1.1%. Obviously, the bank is now at its lowest non-performing loan fluctuation, the rate of bad loans and bad loans will be coming up along the curve. From the2010Year, five large banks on loans start to grow,2010Annual growth1.03%,2011Annual growth4.33%Attention, bank loans and non-performing loans together accounted for the proportion of total loans reached4.55%.

 

If the current China economic growth continues to slow down, the international economic environment continues to worsen, concerned about the type of loans in the future all bank and part of the normal loan will migrate as non-performing loans. But because of the large scale of loans as denominator, China banking non-performing loan rate will take longer than expected time to signs of deterioration.

 

In addition, China banking from2003Emergence of loans extended trend, in the2006Years,2007Years has been accelerated and continues to2010Years. Although part of the reason is the housing mortgage loans extended loan growth because of personal loans, business loans are long-term trends, these factors lead to loan default signs need longer time.

 

In short, with the China banking non-performing loan ratio decreased, allowance increases, capital strength, the ability to deal with asset impact the quality of bank Chinese also enhancing. The rate of bad loans in the banking sector has fallen to historic lows, but in2009Years and2010Years of rapid credit growth environment and the current decline in the macroeconomic slowdown, corporate profit growth environment, future bank non-performing loan rate rebound risks can not be ignored.

 

Because banks in the lending, loan classification and recorded exists underestimate the credit risk problem, as well as the long-term trend of bank loans, non-performing loans appear may take a long time, the future of banking capital and provisioning may still have to bear more risks.