Chinese banks, particularly those with significant exposure to the property sector, may face a 10% drop in earnings by 2024 if bad debt ratios increase due to defaults from "low quality" state-owned developers and private builders. This prediction was made on Wednesday by analysts from JPMorgan Chase & Co. (NYSE:JPM), including Katherine Lei.
The looming threat of increased loan defaults could potentially push the loan ratio up to 13%. This trend is mirrored in the CSI 300 Banks Index. Banks such as Ping An Bank Co. and China Minsheng Banking Corp., which have substantial exposure to the property sector, are grappling with liquidity issues and slow debt restructuring progress amid government pressure.
On the other hand, some banks appear less affected by these developments. These include China Merchants Bank Co., Industrial & Commercial Bank of China (OTC:IDCBY) Ltd., and China Construction Bank (OTC:CICHF) Corp. Although these institutions are also part of the Chinese banking sector, their current situation suggests they may be more resilient to the predicted rise in bad debt ratios.
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