Analysis of the Potential Impact of China's Small Overdue Debt Record Clearing Policy on A-Share Bank Stocks

Regarding China’s proposed policy to clear small overdue debt records, market participants mainly focus on its impact on banks’ risk indicators and profitability. First, the policy aims to stimulate banks’ lending activities and provide borrowers with minor credit blemishes an opportunity to obtain loans again [1]. From the perspective of indicator impacts:

1. Non-Performing Loan Ratio: If the policy involves writing off small overdue debts from banks’ balance sheets, the non-performing loan ratio will decrease due to the reduction in the numerator (non-performing loans); if only records are cleared from credit reports, the ratio will not be affected [1].
2. Provision Coverage Ratio: If the non-performing loan ratio decreases and provisions do not decrease accordingly, the provision coverage ratio will increase; if provisions are adjusted along with the reduction in non-performing loans, the ratio may remain unchanged but net profit will increase [1].
3. Profitability: In the short term, the impact of writing off small overdue debts is limited due to their “small” nature; if the policy drives growth in lending scale, increased net interest income will enhance profitability. However, in the long term, there is a need to警惕 banks relaxing risk control, leading to an increase in future non-performing loans and eroding profitability [1].

The current policy has no official announcement [1], and all analyses are based on assumptions; the actual impact depends on policy details (such as the definition of “small amount”, overdue time limit, implementation method, etc.). From the market reaction perspective, Industrial and Commercial Bank of China (601398.SS) saw its stock price rise by 0.38% on the day of the policy discussion, but trading volume was lower than the previous day, showing no obvious signs of policy reaction [2]. In terms of bank financial indicators, Industrial and Commercial Bank of China currently has a P/E ratio of 7.69x, a P/B ratio of 0.72x, and an ROE of 9.13%, which are at reasonable levels in the industry, but lacks the latest data on non-performing loan ratio and provision coverage ratio [3].

Opportunities: If the policy effectively stimulates bank lending, it will increase banks’ net interest income and enhance short-term profitability; at the same time, it will optimize risk indicators such as non-performing loan ratio and provision coverage ratio, boosting market confidence [1]. Risks: The policy may lead to banks relaxing risk control, triggering an increase in future non-performing loans and affecting long-term profitability; in addition, uncertainty brought by unclear policy details may also impact market expectations [1].

The impact of China’s proposed policy to clear small overdue debt records depends on policy details. It may have a positive impact on banks’ risk indicators in the short term, but long-term changes in risk control need to be watched. Currently, there is no official announcement of the policy, so continuous attention to official developments is required. Bank stock prices have not shown obvious policy reactions yet; further analysis needs to be combined with policy details and bank financial data later.