Chinese Bad Loans Rise

Increase highlights pressure on asset quality as economy weakens.

Chinese banks’ bad loans increased for a third straight quarter, the longest streak of deterioration in eight years, highlighting pressures on asset quality and profit growth as the economy weakens.

Non-performing loans rose by 18.2 billion yuan ($2.86 billion) in the three months ended June 30 to 456.4 billion yuan, the China Banking Regulatory Commission said in a statement on its website today. Bad loans surged at all types of banking institutions, including the largest state-owned lenders, rural banks and foreign banks, the regulator said.

Korean Households

Slowing economic growth is eroding credit quality among South Koreans also. Lenders’ ratio of soured household debt to total lending in the category rose to 0.76 percent in June, almost a six-year high, Korea’s Financial Supervisory Service said today. New bad loans may rise in the second half if the economy deteriorates due to Europe’s debt crisis or slowing growth in China, the FSS said in an e-mailed statement.

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