WHALE OF A TIME: CHINA´S BANKS / THE ECONOMIST

Whale of a time: China’s Banks

Industrial and Commercial Bank of China, the world’s largest bank by assets, reported strong mid-year results today, with net profit 5.8% higher than the same period last year. But beware of extrapolating to the rest of the financial system. Fortunes have diverged sharply. Big banks are in good shape but their smaller peers are hurting. As the government tries to defuse economic risks, it has curtailed dodgy lending practices and reined in overall credit growth.     Defaults have jumped: for the banking sector as a whole, non-performing loans increased by a record last quarter. In order to limit the pain, regulators have called on well-capitalised big banks to expand their lending. They are seizing the opportunity to gobble up market share and cherry-pick the safest borrowers. This is far from ideal for the economy. Large state-owned banks favour stable, stodgy state-owned enterprises over scrappy, innovative private firms. The big get bigger.