Around RMB 5trn expected over the next five years.
According to Barclays Research, 2013 is just the beginning of NPL waves. It expects around RMB 5trn cumulatively (c10% of China’s 2012 GDP) in next five years.
Barclays said, this is based on our top-down approach and assumes “excess bank loans” between 2009-12 and 25% NPL ratio for public and 2.5% for "non-stimulus" loans.
Gross NPL formation rate of the normalized loans could reach 2.5% at the peak.
We believe the NPL cycle has just begun and estimate the gross NPL formation rate in the coming five years (2013E-2017E) to trend upward. The cumulative gross NPL formation rate between 2013 and 2017 in our base case scenario could come close to 5%, which is in line with our forecast.
In the worst case scenario, we estimate the cumulative gross NPL formation rate could be 7.1%, due to accelerating asset quality determination on MSE loans, WMPs and risky interbank assets.
Do you know more about this story? Contact us anonymously through this link.