Data show more loans, credit lines in the offing for key sectors, weak areas

China's banks will continue to provide better support to the real economy by extending more loans and increasing credit lines, especially in key and weak areas, experts said on Wednesday.

They made their remarks after reviewing the latest data from the China Banking and Insurance Regulatory Commission, which showed commercial banks performed better in terms of supporting the manufacturing sector, the private sector, and the small and micro-sized enterprises during the first quarter of the year.

According to the CBIRC, net profits of commercial banks totaled 667.9 billion yuan ($96 billion) in the first quarter, up 1.3 percent year-on-year.

New loans to the manufacturing sector during the period reached 2.2 trillion yuan, up 381.9 billion yuan from a year earlier. Loans to private enterprises came in at 3.7 trillion yuan, up 1 trillion yuan year-on-year.

Inclusive loans to small and micro-sized enterprises expanded to 2.3 trillion yuan in the first quarter, up by 808.8 billion yuan from a year ago.

"Thanks to the supply-side reform and empowerment from digitalization, banks' strength to serve the real economy is on the rise, with the continuous improvement in the structure of loans and credit," said Zhou Maohua, an analyst at China Everbright Bank.

"As the Chinese economy is recovering at a steady pace, financing needs of the real economy will rebound, and commercial banks are expected to further optimize the structure of credit and loans under the premise of increasing loans and credit stably, especially in emerging industries and weak links (on the industrial chain)."

As at the end of the first quarter, outstanding loans to the high-tech manufacturing sector had increased by 28.6 percent year-on-year, while those extended to strategic emerging industries increased by more than 50 percent from a year ago, the CBIRC said.

At a news conference on Wednesday, a CBIRC official said the downtrend in the profit growth of commercial banks in recent years reflects their increasing support for the real economy, as they have made more allowance for potential losses or bad loans.

He linked the bank profitability downtrend to narrowing spreads between deposits and loans.

Banks' loan loss reserves increased 257.2 billion yuan in the first quarter, and the provisioning coverage ratio — loan loss reserves compared with bad loans — was more than 205 percent, a relatively high level.

The CBIRC data also showed financial institutions in the banking sector and insurance companies saw steady expansion in assets during the first quarter. Assets of such financial institutions totaled 397.3 trillion yuan, up 11 percent year-on-year. The assets of insurance companies increased to 28.4 trillion yuan, up 10.5 percent year-on-year.