China's banks are shedding bad loans

Bank_of_China_towerChinese banks are predicted to enjoy share price growth as bad loans decline as a proportion of overall lending. The forecast by Douglas Morton, head of research, Asia, for Northern Trust Capital Markets, is based on data that says Chinese banks' non-performing loans (NPLs) are falling, as a proportion of overall loans, for the first time since 2011. “NPL growth was the primary catalyst for Chinese banks to trade at a discount to global peers,” said Morton. “The current c.40% discount is looking increasingly unsustainable for the most liquid sector in Asia.” Morton also observed that the average return on equity for Chinese banks was 11.6% compared with an average of 9% for global peers. “We remain buyers of Bank of China and HSBC,” he said. ©2018 funds global asia

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