BOC: Credit asset quality controllable in 2021

Bank of China Ltd, a large State-owned commercial lender, estimated that its overall credit asset quality will remain controllable this year, as China has become the first major economy to recover from the COVID-19 pandemic.

However, the asset quality of its domestic institutions will still remain under pressure, considering that China may tighten monetary policies amid the economic recovery and exit from policies supporting small businesses after the policies expire, and the impact of the pandemic could be delayed, said Chen Huaiyu, vice-president at Bank of China.

Some enterprises have not yet fundamentally overcome business difficulties. Some export-oriented companies and disadvantaged private companies in a supply chain may see their profits declining. Besides, the bank should also watch out for regional risks associated with local government debt and local State-owned corporate debt, Chen said on Tuesday.

The bank paid high attention to potential risks associated with the businesses that ran into temporary financial difficulties due to the pandemic and conducted multiple rounds of risk screening on clients whose repayment of principal and interest on loans has been delayed. The information collected so far shows that the overall risk of the bank's lending to these clients remains controllable, he said. 

The bank's credit risk management overseas and the asset quality of its overseas institutions will also bear pressure due to uncertainties in the global economy, as the COVID-19 outbreak may stage a comeback in some European countries. But the bank does not expect to see a large increase in its nonperforming loans overseas, and its credit risk will be generally under control, he said.

"This year, we will further consolidate our bank's asset quality and strengthen our control and mitigation of potential risks. The bank will ramp up nonperforming loan clearance and disposal, adopt a multilayered approach to refine the management of clients whose loans turn sour, continuously improve risk offset capacity by setting aside adequate allowances for impairment losses on loans, and accelerate digital transformation of credit risk management," he said.

Thanks to China's gradual economic recovery and the bank's stepped-up efforts to resolve nonperforming loans, the asset quality of the bank has improved marginally.

Its ratio of nonperforming loans was 1.46 percent at the end of 2020, falling 0.02 percentage points from the end of the previous quarter, although up 0.09 percentage points from the prior year-end.