23 February 2019

Banks should write off NPLs amid policy support, PwC says

Chinese lenders should write off their non-performing loans (NPL) as soon as possible after the Ministry of Finance issued a new set of rules relaxing some restrictions on NPL write-offs, PricewaterhouseCoopers said.

“If banks write off their bad debts in time, there will not be a huge pile of assets being stuck on the balance sheet, and this could better reflect the loan performance,” PwC’s partner in assurance Charles Chow told reporters Wednesday.

“A mature management in banks should write off bad debts once it is possible and this will allow banks to improve efficiency,” said Raymond Yung, PwC’s partner and China financial services leader.

Meanwhile, Chow believes there will be more personal loans and loans for small and medium-sized enterprises in banks’ portfolios as lenders can look forward to higher returns after rate liberalization. Risks can also be better managed when the portfolio is more diversified, he said.

Personal loans in 2013 increased 20.83 percent from the previous year, while corporate loans grew 10.8 percent, the accountancy firm said.

Investment takes up 16.49 percent in banks’ interest income, compared with 14.71 percent last year, while the contribution from customer loans dropped to 68.82 percent from 70.85 percent, Yung said.

– Contact HKEJ at [email protected]



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