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Bad loans almost double in coal-dependent parts of China

The increase in the amount of bad loans on the books of China's major commercial banks has been a focus of the lenders' latest reporting season in China.

A closer look at the reports also reveals that areas of Western China have experienced big jumps in the amount of loan defaults.

For example, Bank of China reported 4.3 billion yuan in non-perfoming loans in the western region of the country in 2013 but that figure has more than doubled in 2014, according to a report in yesterday's Securities Daily.

In the past, Eastern China led the way in terms of the geographic distribution of bad loans, with the province of Zhejiang topping the country in terms of the both the amount of bad loans and also the NPL ratio.

According to the report, in 2014, problems began to appear in areas of China that previously had relatively low rates of non-performing loans.

In 2014, the four large state-owned commercial banks reported bad loans of 74.2 billion yuan in Western China. This translated into an NPL ratio of 1.04 per cent, 0.38 percentage points higher than that reported in the previous year.

The article points to a section of ICBC's annual report that notes the impact of the decline in coal prices on the ability of various coal-related industries to pay back loans over the past year.

Securities Daily cite figures saying that show coal industry profits almost halved last year to 126.9 billion yuan and that over 70 per cent of coal firms were operating at a loss.

In the first half of 2014, 9 provinces reported that all coal companies were operating at a loss and of the 36 major coal enterprises nationwide, 20 were operating at a loss and another 9 were only scraping through with wafer thin profits, according to data from the China National Coal Association.

source:http://www.theaustralian.com.au