Distressed eurozone countries are the worst hit.
According to BMI Research, the highest NPL ratios belong to distressed eurozone countries that have seen severe banking crises in the past five years, including Greece, Portugal and Cyprus; additionally, countries that have endured more idiosyncratic crises, such as Ukraine, have very high NPL levels (see chart). On the other end of the scale are developed countries such as the US.
"While the official data usually gives an accurate picture as to the general s tate of asset quality in a country, sometimes our analysts need to overlay the official data with additional scrutiny of the state of the banking sector to get a sense of the true risk."
Here's more from BMI Research:
China is a good case in point, where the headline figure unders tates risk, in our view. The headline NPL ratio reported by the China Banking Regulatory Commission has risen to a multi-year high of 1.8% as of Q216 (from a low of 0 .9% in Q309), but as we have previously asserted, this figure is highly understated.
Chinese banks manage their reported NPL ratios closely and have extended the amount of time that a loan can be overdue before they classify it as bad, particularly for state-owned enterprises. The 'at-risk' credit ratio in China could be around 20%, and if more stringent criteria were to be applied, the figure could be estimated to be as high as 30%.
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