Chinese banks face a spike in bad loans amid slowing economic growth, PwC warns in a new report.
"There are a variety of indications that credit risk exposure is accelerating," said PwC China Banking and Capital Markets leader Jimmy Leung in a press release published on Thursday.
Asset quality continues to worsen, while the average overdue loan period is constantly increasing, Leung said, noting there is growing pressure on overdue loans to be downgraded to the non-performing loan category.
Slowing growth in the world's second largest economy prompted the People's Bank of China (PBoC) to stimulate lending, but that has seen the quality of loans deteriorate.
China's economy expanded at its slowest full-year pace in 24 years in 2014, undershooting the government's target for the first time since 1998. The economy continued to lose momentum in the first quarter of 2015 with on-year growth marking its slowest pace in six years.
The PBoC has undertaken easing measures to prevent the economy from slowing further. Most recently, the central bank cut the reserve requirement ratio (RRR) for banks by 100 basis points on April 19 to stimulate lending – the second RRR cut in as many months.
More bad loans
As the economy slows, the loan books at China's 12 biggest listed banks are growing, but the quality of their loans appears to be deteriorating.