Abnormal lending pace raises red flags
(24 February 2012 – Asia) China’s "big four" banks have started the year with an abnormally slow lending pace.
Industrial & Commercial Bank of China Ltd, China Construction Bank Corporation, Bank of China Ltd and Agricultural Bank of China Ltd together extended new loans amounting to US$11.1 billion (A$10.4 billion) in the first three weeks of February, which is uncharacteristic said state-run Shanghai Securities News without giving comparable data.
The big four traditionally account for a third of all new loans. They normally front-load lending in the first few months every year to boost market share.
The slow lending pace is worse than January when the entire banking industry issued US$117 billion in new loans, a 29 percent plunge year-on-year. The amount is the lowest for new loans for a January since 2007.
China International Capital Corporation, however, said banks could issue up to US$127 million in new loans this month. Citic Securities estimated that overall new loans could reach US$270 billion in February and March.
Chinese banks are required to maintain a loan-to-deposit ratio of about 75 percent daily. With deposit growth weak, investors are chasing higher returns in the face of rising inflation.
In a bid to boost lending, the People's Bank of China, the central bank, said it was cutting banks' reserve requirement ratio by 0.5 percentage point effective Friday.
The big four traditionally account for a third of all new loans. They normally front-load lending in the first few months every year to boost market share.
The slow lending pace is worse than January when the entire banking industry issued US$117 billion in new loans, a 29 percent plunge year-on-year. The amount is the lowest for new loans for a January since 2007.
China International Capital Corporation, however, said banks could issue up to US$127 million in new loans this month. Citic Securities estimated that overall new loans could reach US$270 billion in February and March.
Chinese banks are required to maintain a loan-to-deposit ratio of about 75 percent daily. With deposit growth weak, investors are chasing higher returns in the face of rising inflation.
In a bid to boost lending, the People's Bank of China, the central bank, said it was cutting banks' reserve requirement ratio by 0.5 percentage point effective Friday.
Subscribe