Chinese slowdown sends ripples across Asian banks

Wed Aug 19, 2015 1:17am EDT
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By Lawrence White

HONG KONG (Reuters) - Asian lenders are seeing their loan books rapidly deteriorate across the region as China's slowing economy dampens trade and hurts companies that had borrowed heavily from the banks.

Among 23 major non-Chinese lenders, all but 6 reported an increase in soured loans in the first half of 2015, the strongest indication yet of how China's slowdown is infecting banks' balance sheets, data compiled by SNL Financial for Reuters show.

That trend accelerated in the second quarter, the banks' data show.

"Second-quarter results have seen banks across Asia suffer rising bad loans after a period of historic lows in NPL levels," said Josh Klaczek, JPMorgan head of Asia financials research.

"China's slowing growth has particularly hit shorter duration trade-related loans, but is likely to have a broader impact on commodity credit, given its importance as an end-user."

The data indicate how banks regionwide are suffering even when, like in Indonesia, they are not lending much directly to Chinese companies, as trade across Asia stutters.

Indonesian banks saw provisions against bad loans as much as triple in the first half of 2015.

"Most of the Indonesian banks said their increasing non performing loans (NPLs) are because of the mining and construction sectors, which have been hit the most by slowing demand from China," said analyst Syaiful Adrian at Ciptadana Securities.   Continued...

People take photos with the skyline of the financial district of Singapore in the background April 14, 2014. EUTERS/Edgar Su