| SHANGHAI/HONG KONG, Sept 1
SHANGHAI/HONG KONG, Sept 1 Grappling with a
slowing economy, China's biggest banks are turning their back on
mainstay borrowers like manufacturers and courting high growth
industries such as healthcare, food and IT in a bid to boost
The shift in focus by the state-owned lenders coincides with
a spike in non-performing loans and slower profit growth as
China's vast factory sector flounders.
For the first half of this year, the banks reported an
increase in bad loans from the Yangtze delta, the country's main
export-focused manufacturing belt, as well as the Bohai
China's biggest bank, the Industrial and Commercial Bank of
China , also said 80 percent of new
non-performing loans in the second quarter came from
manufacturing and wholesale.
Several lenders said they expect bad loans to continue
rising this year, especially from creditors in the steel,
wholesale and shipping sectors. The Agricultural Bank of China
, for example, said it had cut loans to
customers in steel making and ship building by almost 39 billion
yuan ($6.4 billion).
Loan officers at several banks told Reuters they were no
longer working on sectors like shipping and commodities,
focusing instead on high-growth areas like health and
Other bankers said they would look to generate more revenue
from asset management, trust lending and financial leasing.
Some banks, like Bank of China (BoC) ,
were also looking to extend loans to domestic clients through
their overseas branches to capitalise on higher interest
"We'll make our own risk assessments on a case-by-case
basis, but healthcare and high-tech electronics will be a
focus," said a senior BoC loan officer.
"As lending conditions continue to tighten domestically,
we're also helping our borrowers seek better terms abroad," he
added. BoC said loans at its overseas branches rose almost 40
percent year-on-year at the end of the second quarter to 262
The banks' efforts to diversify their borrowers could be
hampered by the government, which uses these lenders as a means
of directing credit to struggling industries and stimulating
growth when the economy is struggling.
But with the level of bad loans as of June at its highest
since 2011, the government may give lenders more autonomy.
"Misdirected lending is the biggest bane of banking, because
it might lead to credit losses and ultimately they'll have to
write off those losses," said Roshan Francis Padamadan, who
manages $2.1 million for investors in the Luminance Global Fund.
($1 = 6.1430 Chinese yuan)
(Editing by Miral Fahmy)