Chinese banks’ NPLs rise for seventh straight quarter

Propelled by China’s souring economy.

The China Banking Regulatory Commission said non-performing loans hit US$88.2 billion in the second quarter from the end of March, up by US$$2.1 billion.

More ominously, NPLs increased across all lender categories, including state-owned and regional banks. The bad loan streak is the longest in at least nine years as China’s economy continued to flee from growth.

China’s economy slowed for a second straight quarter during the period while growth in factory output and fixed-asset investment weakened. A June crackdown on off-balance-sheet lending and other credit outside the banking system caused a cash crunch, driving money-market rates to record highs in late June.

The net interest margin at the nation’s 3,800 lenders widened to 2.59% in the second quarter from 2.57% in the first quarter. The People’s Bank of China last month removed the floor on lending rates offered by the nation’s financial institutions as authorities give banks more freedom to set borrowing costs.