Chinese banks have seen their average Non-Performing Loan (NPL) ratio drop to single figures for the first time, reports the banking watchdog.

In their latest report, the China Banking Regulatory Commission (CBRC) revealed the banks' NPL ratio has shrunk 4.2 percentage points in 2005 to 8.6 percent.

Their outstanding NPLs came to 1.31 trillion yuan at the end of last year, 517.6 billion yuan less than in the previous year.

The Big Four state banks, namely the Bank Of China, China Construction Bank, Industrial and Commercial Bank of China and Agricultural Bank of China, and a dozen national shareholding banks, which were viewed as the bedrock of China's banking system, posted a reduction of 4.3 percentage points in NPL ratio to 8.9 percent.

The government is overhauling the banks -- by encouraging investment from overseas and listing them on the stock market -- ahead of the full opening of China's financial industry before the end of the year.

Their current NPL ratio, however, is still well above the 1-2 percent level reported by the renowned international banks.

According to an earlier CBRC report, the major Chinese banks recorded 185 billion yuan in pre-tax profits last year. Their equity capital shot up 24.5 percent from the previous year to 1.1 trillion yuan, increasing at a faster pace than loans, assets and deposits for the first time ever.

China's banking institutions also include city and rural commercial banks, rural credit cooperatives and banks from overseas.

A total of 53 Chinese banks reported that their capital adequacy ratio -- a measure of their own capital in proportion to outstanding loans -- topped the 8 percent minimum requirement, which is the international standard.

Source: Xinhua