October 15, 2015 / 12:45 PM / 2 years ago

China Minsheng Bank reorganises loan ops as systemic risks seen rising

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By Shu Zhang and Matthew Miller

BEIJING, Oct 15 (Reuters) - China Minsheng Banking Corp , the country's biggest private lender by assets, warned on Thursday of growing systemic risks in its home market and said it was reorganising its loan operations after suffering a sharp rise in bad debts.

Minsheng Bank's profit growth and business operations are facing "the biggest pressure in recent years," said Assistant President Shi Jie, responsible for the bank's credit assessment department, at a press conference on Thursday.

"The possibility for systematic, concentrated financial risk to happen in China is growing ... Next year Minsheng Bank will face an even worse environment and bigger challenges," Shi said.

China's economic growth is expected to fall below 7 percent in the third quarter, and Chinese leaders have been trying to reassure global markets they are able to manage the world's second-largest economy after a shock yuan devaluation and a summer stock market plunge.

Minsheng, headquartered in Beijing, said earlier this year its so-called special-mention loans, which are doubtful but still performing, surged 86 percent to 66.73 billion yuan in the first half, while overdue loans increased 52 percent.

Minsheng currently separates its loan business by sector and into independent departments, covering energy, metallurgy, transportation, healthcare, culture, agriculture, trade and real estate. It said the new model will allow it to allocate limited resources on strategic businesses and focus less on struggling sectors such as metallurgy, coal and ship manufacture.

The bank also will strengthen headquarters' control over project selection and risk management, Shi added.

The bank's metallurgy finance department had an NPL ratio as high as 7.05 percent at the end of June. Its transportation finance department ratio was 2.88 percent and its energy finance department ratio was 2.27 percent.

Real estate finance, Minsheng's best-performing business line, reported an NPL ratio of 0.27 percent at the end of June, and is the only loan division that will remain independent under the restructuring.

Last month, Standard & Poor's Ratings Services downgraded its outlook on Minsheng to negative from stable. ($1 = 6.3459 Chinese yuan renminbi) (Editing by David Holmes)

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