70625
The Industrial and Commercial Bank of China
The Industrial and Commercial Bank of China

China Banks Under Pressure Over Gov’t Lending Crackdown

China Banks Under Pressure Over Gov’t Lending Crackdown

Chinese banks are set to see a slowdown in lending growth in the second half of the year, having exhausted most of their annual credit quota, raising the specter of corporate defaults as financing costs climb further in the world’s No.2 economy.
Beijing’s crackdown on riskier lending has already stretched financing costs and hurt profit margins. Analysts estimate banks have used 80% of their yearly credit quota over January-June, versus the usual 60%, amid a regulatory push to bring shadow financing activities to the main loan book, Reuters reported.
“Loan demand is strong throughout the whole year,” said Ma Kunpeng, chief financial industry analyst at China Merchants Securities. “The core conflict in the second half is loan quota—whether banks will be able to extend more loans than they originally planned.”
The country’s top five lenders, including Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China, will report their first-half results over the next two weeks.
For China’s top lender ICBC, the margin is forecast to narrow to 2.13% in 2017 from 2.21% last year, while CCB could report a drop of 27 basis points to 2.09% in 2017, Thomson Reuters data shows.
China saw a 12.9% growth in outstanding yuan loans as of June end. Nomura’s China economist Wendy Chen expects this to moderate to 12.6% year-on-year in the third quarter and 12.4% in fourth, from 13.5% in 2016.
China’s policymakers have said the government will continue to lower overall leverage and that slower growth in broad M2 money supply, which includes demand deposits and monies held in easily accessible accounts, could be a “new normal”.
The central bank has also increased checks on banks’ off-balance sheet wealth management products—a key component of shadow banking credit—while the banking regulator has stepped up a crackdown on risky lending behaviors.
“Corporate defaults will rise if the availability of finance is further restricted. This could become a threat to economic growth ... especially if defaults are concentrated in labor-intensive segments like steel and coal,” Moody’s said.
China’s economic growth showed signs of fading in July as lending costs rose, but a hard landing is unlikely with Beijing keen to ensure stability ahead of a once-in-five-years Communist Party leadership reshuffle later this year.
China’s commercial banks reported higher first-half profits, while overall non-performing loans in June did not increase from March, the banking regulator said on Monday.
But analysts cautioned that slower credit growth would eventually take a toll on banks’ profit margins.

Short URL : https://goo.gl/UpBdPV
  1. https://goo.gl/sSA981
  • https://goo.gl/kcG3uL
  • https://goo.gl/DmhJ1f
  • https://goo.gl/iDM81q
  • https://goo.gl/b7V1kU

You can also read ...

China Warned of Ballooning SOEs
Former chief of the World Bank Robert Zoellick cautioned China...
Business confidence fell to its lowest level since August 2013 and around 7% of companies expected a contraction.
According to data from the International Monetary Fund in...
Shrinking unemployment in the US, Japan and the eurozone finally forces companies  to lift wages to retain and attract staff.
Workers in the world's richest countries are getting their...
New Zealand Q2 GDP Growth Picking Up
New Zealand’s economic growth is expected to have accelerated...
Saudi Sovereign Fund Secures $11 Billion Loan
Saudi Arabia's sovereign wealth fund said Monday it had...
Lira Eases Against Dollar
Turkey’s lira weakened against the dollar on Monday as...
By 2025 more than half of all current workplace tasks  will be performed by machines.
Robots will handle 52% of current work tasks by 2025, almost...
Myanmar Businesses Want Lower Taxes
Myanmar businesses are urging the government to lower the...

Add new comment

Read our comment policy before posting your viewpoints

Trending

Googleplus