• State owned banks accounted for 60% of total asset by balance sheet  
• City commercial banks witnessed the highest balance sheet growth
• Foreign banks and stated owned banks demonstrated the lowest credit risk exposure among Chinese banks

In this year’s The Asian Banker Strongest Banks By Balance Sheet evaluation, Chinese banks well positioned themselves on the ranking with weighted average score stood at 3.40 out of 5.0, just behind that of Hong Kong banks (3.97) and Singapore banks (3.67). Overall, the banking industry’s operating income and profit grew 8.2% and 9.2% compared with same period last year. Amid COVID-19 pandemic, the overall profitability for Chinese banks weakened with ROE and ROA stook at 9.4% and 0.7%.

In terms of asset, state owned banks still dominated. Out of 136 Chinese banks on the rankings, 6 state owned banks accounted for 57% of total asset by balance sheet followed by 11 joint stocks (24%), 73 city commercial banks (14%) and 42 rural commercial banks (4%). Foreign banks accounted of less than 1% by total assets.  

Figure 1: State Owned Banks dominated in terms of total asset

Source: TAB Research

However, city commercial banks witnessed the highest balance sheet growth in the year under review, with total asset grown by 12.8% along with deposit and loan growth at 18.9% and 20.3% respectively.

Figure 2: City commercial banks achieved the highest balance sheet growth

Source: TAB Research

On average, foreign banks and stated owned banks demonstrated the lowest credit risk exposure among Chinese banks. Foreign banks had the lowest NPL ratio at 0.69% followed by state owned banks (1.4%) and joint stock banks (1.6%). Provincial banks had the highest NPL which was over 1.7%. As for loan loss reserve, foreign banks had the highest at 300.6% followed by rural commercial banks’ 255.8%. State owned banks reserve level were at the middle which was around 240% while city commercial (214.4%) and joint stock (205.7%) banks were the lowest.

Figure 3: State Owned Banks dominated in terms of total asset

Source: TAB Research

The trend was echoed on the list of 10 Chinese banks with highest NPL ratio. Joint stock banks, city commercial banks and rural commercial banks accounted for 9 out of 10 banks on the list. The only state owned bank on the list was Bank of Communications. As for loan loss reserve for these banks, aside from Ping An Bank, the rest were all below the average level of their respective categories.

Figure 4: 10 listed Chinese banks with highest NPL

Source: TAB Research

Analyst from Huabei Security commented that the overall NPL for listed Chinese banks remained stable, which was due to the fact banks intended to identify the bad loans to a later stage due to COVID-19.