Despite its differences, India’s banking system is quite similar to China’s, particularly in terms of its receptivity to credit cycles and non-performing assets.
The downturn that is subtly developing in the Chinese banking sector is the newest topic of discussion in international banking circles.
In essence, this demonstrates the inherent weaknesses of extensive financial institutions in the face of economic challenges.
What is the problem exactly?
A record-low net interest margin of 1.42%, far below the 1.8% criterion for sustainable profitability, and rising loan losses are the main causes of this reduction, which is the first since the pandemic-induced fall in 2020.
Significant lenders, such as the Industrial and Commercial Bank of China, revealed a 1.4% decline in net profit to 164.43 billion yuan, highlighting the strains from a slow real estate market, low demand for loans, and frequent interest rate reductions.
Conclusion:
China’s banks face declining profits and rising loan losses, highlighting vulnerabilities similar to India’s banking sector.