February 20, 2020 / 8:03 AM / 3 months ago

Chinese banks' bad loans may spike by up to $1.1 trln due to virus hit - S&P Global

BEIJING, Feb 20 (Reuters) - China’s banking sector may face a surge of up to 7.7 trillion yuan ($1.10 trillion) of non-performing loans (NPLs) in 2020 if the coronavirus outbreak doesn’t peak until April, credit agency S&P Global estimated on Thursday.

“As the coronavirus outbreak disrupts Chinese production, some companies and individuals will have difficulty with debt repayments,” S&P Global warned in a Thursday report.

China is struggling to contain the epidemic which has killed nearly 2,100 and infected more than 75,000, sparking strict travel and movement curbs that have kept many businesses shut, disrupting demand and supply for goods and services.

As part of efforts to cushion the impact, the financial regulators have urged banks to lower the interest rates and extend loans to targeted companies that have been affected by the outbreak.

Local authorities are also compiling a list of firms to help the central bank, the People’s Bank of China (PBOC), funnel 300 billion yuan of cheap loans to virus-hit companies nationwide.

“We expect China will loosen NPL recognition standards to help affected businesses and communities, and that it may take years to digest the forbearance,” it added. ($1 = 7.0166 Chinese yuan) (Reporting by Cheng Leng and Ryan Woo Editing by Shri Navaratnam)

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