The rising level of nonperforming loans (NPLs) has given local asset management companies (AMCs) large scope for development, but it's also making the competition fierce, said a report released by McKinsey & Company on Thursday.
The report said that NPLs in China are booming, and it forecast that such loans could reach 4.8 trillion yuan ($707.83 billion) by 2020 at traditional financial institutions. NPLs at non-bank financial institutions are also expanding, making a huge market for the AMCs.
The NPL ratio of Chinese banks stood at 1.86 percent by the end of May, with stable liquidity and abundant capital and provision, Xinhua reported on Tuesday.
Beyond the traditional four AMC giants, there are more companies involved in China's AMC market. However, local AMCs still face challenges such as unclear strategic positioning and immature incentive mechanisms, the report said.
Huang He, partner at McKinsey & Company, said in the report that unclear strategic positioning will mean inconsistent business promotions and resource allocation, resulting in a lack of competitiveness of the NPLs.
