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China's top banking regulator on Monday urged joint stock banks to watch their bottom lines and be wary of risk while supporting manufacturers and service providers.
The remarks from Shang Fulin, chairman of the China Banking Regulatory Commission, follows a record August in new yuan loans. The comments came at a joint stock bank meeting, according to a statement published on CBRC's official website.
Shang said commercial lenders must strengthen comprehensive risk management to improve their risk control in a complex environment.
"Take effective measures to identify, measure, cushion, control and resolve risks, to make sure their operation is stable and prudent," Shang said.
Shang's cautionary note comes as Chinese listed banks, particularly smaller ones, reported some degree of asset deterioration in their interim results. Ping An Bank Co Ltd reported a 51 percent jump in non-performing loans.
Evidence of more NPLs are in the pipeline as special-mention loans and delinquent loans, indicators of potential loans that would turn bad, are rising, said Moody's Investors Service Inc in a report released at the end of August.
And joint stock banks that have more exposure to small and medium-size enterprises reported the sharpest increases in special-mention and delinquent loans, it said.
Concerns over the asset quality of Chinese lenders have been rising in the wake of the extended record-high new yuan loans last month compared with any previous August, and as the government seeks financial support for new rounds of investment projects intended to spur economic growth.
New yuan lending reached 703.9 billion yuan ($111 billion) in August, up 155.5 billion from the same period last year, according to data released by the People's Bank of China, beating market expectations of around 600 billion yuan.
By the end of June, asset of Chinese joint stock banks reached 21.18 trillion yuan, accounting for 16.7 percent of total banking assets. Their outstanding loans to small businesses exceeded 1.4 trillion yuan, 20.5 percent of total corporate lending, according to data released by CBRC.
NPL ratio among joint stock banks stood at 0.65 percent, while their capital adequacy ratio was 11.64 percent by the end of June, it said.