China's joint stock banks, especially the listed lenders, are performing better than their state-owned counterparts and are some of the strongest forces in the Asia-Pacific banking community.

Shanghai Pudong Development Bank, China Merchants Bank and China Minsheng Banking Corp are on the list of top 50 banks according to a ranking by The Asian Banker, a leading financial information company in the region.

The three Shanghai-listed lenders scored comparatively high marks according to major performance criteria - financial and operational parameters, asset quality, and improvements in profits and assets vis-a-vis the previous year - in Asia's Strongest Banks ranking by The Asian Banker.

Pudong Bank is ranked 15th in the list, with Merchants Bank and China Minsheng sharing 38th.

The three banks carry an average non-performing loan ratio of 3.8 percent, compared with an average NPL ratio of around 15.76 percent in the other 13 domestic banks that are listed in the Asian Banker's ranking of 300 strongest Asian-Pacific lenders.

China's five domestically listed lenders - Pudong Bank, Merchants Bank, China Minsheng, Shenzhen Development Bank and Huaxia Bank - netted more than 24.23 billion yuan (US$2.92 billion) through their initial public offerings.

"Moving into 2003, shareholding banks continued to flourish," said Li-May Chew, research manager of The Asian Banker. "China Minsheng for instance, saw almost a 50 percent increase in net income to 638 million yuan in the six months to June 2003."

Meanwhile, the strongest banks list shows up the weakness of the state banks in disposing their NPLs and also reflects their low capital adequacy ratio, which measures a bank's health by comparing the percentage of qualifying capital to total risk-weighted exposure.

The adequacy ratio of Industrial and Commercial Bank of China, the largest lender on China's mainland, is 5.5 percent, far lower than the minimum 8 percent requirement in the Basle Capital Accord. The standard is set to ensure that a bank with international operations can absorb a reasonable level of losses before becoming insolvent.

The problem facing China's big four state-owned commercial banks - ICBC, Bank of China, China Construction Bank and Agricultural Bank of China - is largely due to their granting low-yield, policy-directed financing to state-owned enterprises.

(Shanghai Daily November 6, 2003)