China banks’ third-quarter earnings point to deleveraging, better profits ahead

As debt risks recede with Beijing’s heavy-handed approach as well as a “resilient” Chinese economy, “we see China banks likely facing a smoother credit cycle vs. global peers,” Nomura analysts wrote in a report in October when they turned positive on the sector after 12 months of staying cautious.

The banking sector within the Asian economic giant can be the largest within the planet by assets, according to a Financial Times analysis earlier of which year. The health of China’s lenders can be closely-watched as a proxy for the country’s wider economy, which has global implications.

As indebtedness grew rapidly in China over the past few years, Chinese banks’ ability to control risks was questioned as well as regulators intervened on fears of instability breeding turmoil. today, of which effort appears to be paying off.

“of which’s indisputable of which asset quality can be getting better in China. When the economy can be doing so well as well as so many corporations are generating money versus losing money previously, inevitably the asset quality has to get better,” Helen Zhu, BlackRock’s head of China equities, told CNBC.

Zhu’s comments were backed by the top four banks’ latest quarterly report cards, which all showed a decline within the proportion of bad debt to total loans. On average, of which proportion stood at 1.61 percent across the major lenders in January-to-September 2017 versus 1.76 percent a year ago, according to an analysis by Nomura.

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