China’s five largest banks reported better-than-expected figures for their bad debt when they announced their full year financial results, helped by improved macro-economic conditions and more aggressive attempts to clean up their balance sheets. Non-performing loan (NPL) ratios declined at the China Construction Bank (CCB), Agricultural Bank of China (ABC), Bank of China (BOC), and Bank of Communications (BoCom) during the fourth quarter of 2016, while the ratio at the Industrial & Commercial Bank of China (ICBC) remained broadly unchanged. “Banks have been making use more forcefully of a wider range of instruments to deal with their bad loans in this credit cycle,” said Bernhard Kotanko, Managing Partner Asia Pacific for consultancy Oliver Wyman. “These have included securitization and debt-for-equity swaps, among others.” Construction Bank’s debt-for-equity swaps will exceed CNY300 billion by the end of the first quarter of 2017, bank President Wang Zuji said. Agricultural Bank President Zhao Huan said that his bank’s program so far was worth CNY70 billion from eight deals, and that there were 20 more swaps to come. “All of the banks are trying to manage and offload their NPLs to improve their asset quality, but there remains a concern about transparency,” said Kotanko. “One challenge for Chinese banks is how to increase the confidence in asset quality figures that they are reporting.”