Du Xiaotong, a reporter from the Securities Times

As of April 9, nearly 70% of China's listed banks have disclosed their 2020 annual reports, and the asset quality that has attracted much attention from the industry is also clear. Data show that in the past year, listed banks generally increased provisions and bad disposal at the expense of ceding part of their profit margins, and warmed up asset quality during the year.

Since 2016, banks' strict recognition of assets has continued to increase. Based on the caliber of loans overdue for more than 90 days, among the stock banks that have disclosed their annual reports, the weighted average deviation of non-performing loans is 76%, 2.6 percentage points lower than in 2019; at the end of 2020, the index of six major state-owned banks was 55.4%, a decrease of 9.8 percentage points compared with 2019, of which only 49% were Agricultural Bank and Construction Bank. In other words, more than half of the non-performing loans of the two banks are overdue within 90 days.

Most non-performing loans are formed by the downward relocation of concerned loans, so the proportion of concerned loans is often regarded as a leading indicator of the future trend of non-performing loan ratio. At the end of 2020, among the six state-owned banks, only the concern loans of the Construction Bank accounted for a slight increase of 0.02 percentage points compared with the end of last year, while the rest of the state-owned banks improved significantly, while the proportion of the overall concern loans of joint-stock banks remained stable. From this point of view, after clearing the bad burden of large and medium-sized banks in recent years, the pressure of asset quality deterioration has been greatly reduced.

Asset risk management has become a frequently mentioned topic in the annual reports of listed banks this year. Executives put more emphasis on improving risk compliance, internal control management system and improving the ability of risk compliance management.

However, the uncertainty of the current external environment is still large, coupled with the possible lag exposure of new non-performing assets, the test of bank asset quality is not over. In 2021, the banking industry will face problems such as the withdrawal of deferred loan policies, bad financial returns, differences in the pace of economic regional and industry structural recovery, and so on. Under the guidance of supervision, there is also a greater risk of uncertainty in some cyclical industries such as the real estate industry. According to the judgment of city commercial banks and joint-stock banks, the relevant stock customers of their services may be exposed.

In addition, while seeing that the large and medium-sized listed banks are unhealthy and the asset quality is stabilizing, we should also pay attention to the fact that a large number of urban commercial banks and agricultural commercial banks are unable to cope with the deterioration of asset quality. in particular, the operating situation of some small and medium-sized banks with heavy burdens is grim.

Since last year, the regulatory authorities have made an exception to open the path for local government special bonds to replenish the capital of small and medium-sized banks, and the number of urban commercial banks and agricultural commercial banks that carry out mergers and restructuring or tie-in sales have also significantly increased. The fundamental reason is that it is difficult for some small and medium-sized banks to resist external risks through existing endogenous resources. However, no matter how non-performing assets move, they will not be reduced out of thin air, and improving their business thinking may be the fundamental way for these banks to survive. There is no shortage of big banks in China, but banks with flexible mechanisms, rich business formats and professional service capabilities. With the development of financial disintermediation and interest rate marketization, the banking industry with serious homogenization will face a more severe survival of the fittest.