Bank Digitalization, Credit Reallocation, and Risk Costs

I examine how bank digitalization relates to lending composition and reported impairment losses. Using an unbalanced panel of 187 Chinese banks over 2010–2023, I estimate conditional within-bank associations. A one-standard-deviation increase in digitalization is associated with a 1.1 percentagepoint higher loan-to-asset ratio in the baseline regression and a 2.1–2.9 percentage-point higher loan-to-deposit ratio across the raw-outcome specifications. The loan-to-deposit association remains precisely estimated after winsorization and with province-by-year effects; the loan-share estimates weaken after winsorization. Loan-growth estimates are imprecise. Reported impairment losses relative to operating income are also higher, although the evidence weakens with province-by-year effects. Joint component regressions associate business digitalization with the loan share and management digitalization with the impairment ratio. The findings complement evidence on borrower access and household outcomes by distinguishing the composition of bank lending from credit growth and impairment accounting.