【英文】瑞银报告：中国银行业报告：新冠疫情下迎接一个糟糕的不良贷款周期（67页）

Despite mounting pressure on upcoming potential bad debt formation, we think  the earnings impact to listed banks may not be as large. In fact, credit costs of  both the big 4 banks and listed JSBs in 2019 are already at close to historical high  over the past 15 years, which should act as the first line of defence before further  erosion to earnings.  In addition, listed banks have strengthened their risk buffers noticeably over the  past three years. Credit costs for the big 4 banks and listed JSBs stayed elevated  since 2015 and averaged at around 1% and 2% respectively in 2019. This has  helped to improve the NPL coverage of large banks visibly from the level in 2016.  More importantly, due to tighter supervision by the regulator, China banks’ NPL  classification standards are now more stringent, evidenced by a substantial  increase in NPL/ 90-day+ overdue ratio among both the big 4 banks and JSBs.

 In the last credit cycle in 2013-19, we believe a majority of the NPLs recognised  were from corporate loans to POEs, which generally have fewer financial resources  and weather down cycles not as well as SOEs. This is evidenced by the elevated  NPL ratios reported by listed banks on manufacturing sector and wholesale & retail  sector, which generally consist of a much higher share of private-owned entities  (POE) as well as small-/ medium-sized enterprises (SMEs) than other sectors.  For China banks under our coverage, NPL ratios of manufacturing sector, and  wholesale & retail sector have been trending up over the past several years, and  most have reached a peak-level of 7% and 10%, respectively (Figure 17 and Figure  18). Excluding these two sectors, NPL ratios of the remaining domestic corporate  loan book have remained far lower at below 1.5% for most banks (Figure 19).  Given the higher risks for lending to the manufacturing and wholesale & retail  sectors, most banks have been shrinking their exposure to these two sectors in the  past (Figure 20). Excluding PSBC, MSB and CQRCB, other banks among our  coverage in aggregate reported 12% decline in loan balance to manufacturing  sector during 2014-19, and 33% decline for wholesale & retail sector.