Bank of Communications wants faster-than-average loan growth from small and medium enterprises this year as the bank seeks higher margins, its executive vice president said Wednesday.

The Shanghai-based bank expects its loans to smaller clients to rise faster than its average loan growth this year, said Qian Wenhui, executive vice president of the fifth-biggest bank in China.

Qian didn't disclose the bank's loan growth target this year but said loans extended to smaller businesses will rise as the bank seeks higher returns.

Banks can get a higher margin from smaller businesses due to their higher risk exposure.

The bank set up a team solely to serve smaller businesses earlier this year. The bank has more than 30,000 small-business clients, which account for more than half of its outstanding loans. Smaller firms in the Yangtze River Delta account for half of such lending.

Fitch Ratings said in a report that Chinese banks are facing rising medium-term risks as they rush to lend money at shrinking loan margins.

Chinese banks issued record-high levels of credit in the first four months of the year and the oversupply of liquidity helped squeeze the interest margin.

Banks in China extended a record 5.17 trillion yuan (US$757 billion) of new loans in the first four months, fanning concerns about credit quality in a weak corporate climate. Fitch expects a 20 percent loan growth in China this year.

(Shanghai Daily June 11, 2009)