Top 5 banks’ non-performing loans amounted to 42.28% of profits
In the afternoon of the 27th March, the China Banking Regulatory Commission released the “Regulation on the Operation of Commercial Bank Financing Business Investment”. Affected by this news,a large number of banking stocks fell sharply today.
In addition, the recently released annual reports of the five major state owned banks showed that the balance of non-performing loans for these five banks amounted to 327.484 billion yuan in the end of 2012, equivalent to 42.28 percent to their total net profit. Apart from that the Agricultural Bank of China’s non-performing loan balance is decreased by 15.1 billion yuan over the previous year, the non-performing loan balance for other four banks have all increased.
According to an earlier research report of JP Morgan, China’s stock market rating fell to “underweight”, it was recommended that the customers reduce the holdings of Chinese stocks, in particular financial derivatives of the Bank of China, Agricultural Bank of China, Industrial and Commercial Bank of China, China Construction Bank. The main reason is that China’s economic growth has slowed and inflation is accelerated. Today’s falling of the banking stocks, perhaps confirms JP Morgan accuracy in prediction.