Chillin' out till it needs to be funded
When early last month, China banks reported a 25% Y/Y slowdown to CnY 750 bln or $125 bln it was now so slow if including the Year of the Dragon celebrations and the shortage of Capital at the big banks that lent $50 bln or CnY 300 bln to their accounts. This month, banks would be looking at softer targets compared to 2010 but the loan growth is already back esp at the ICBC corp and China Construction Bank franchises with November only at CnY 562 bln or $94 bln and December a $16 bln higher at CnY665 bln or $111 bln before getting into January at another $16 bln higher in lending.
China’s money supply had grown 13.6% in 2011 though regulators wanted a 16% clip. The target for 2012 has been revised down to a moderate 14% but policy action due later , makes us think it will be outperformed easily this year if mortgage constraints are removed and currency speculation allowed again for residents. ICBC has already ordered 45 cOMAC and 15 Boeings these three-six months for its leasing unit. Regional Banks are issuing $4 bln worth paper in HongKong by March. Yesterday the Big 4 agreed to lower priced first time property loans, however the policy is unlikely to support higher end luxusy villa developments and focus on cheaper urban housing.
ICBC targets are CnY 850 bln or $140 bln and CCB at CnY 750 bln or $125 bln with AgBank and BOC contributing CnY 1250 bln or $210 bln, by targets , implying a CnY 8 tln target or $1.3 Tln target for new lending by the CBRC up from CnY7.5 tln in 2011. February lending was below CnY 100 bln in the first three weeks of 2012.
February numbers would be similarily strong as Huijin has continued updating Capital in January and February by buying higher stakes in the Big 4 and the Local losses need not be extra provisioned, as out of the expected 12% loss portfolio at
least half would have been rolled up into new loans till 2016. The above loan growth figure is of net new credit, and yet down 25% from 2011 and with state capital in tow , even though it is unlikely to exceed the CnY 9 tln targets this year it would easily reach that much in new loans and just stop short of overheating the system and not jeopardise the soft lending to be confirmed by this month’s data.
Three china policy Banks including the Agricultural Development Bank, China Development Bank and the Exim Bank would be raising Dim Sum bonds monies in London this week while local provinces open up to using cash from Hongkong for mainland projects following International trade in Yuan encouraged thru issues from Hongkong and available of Yuan for speculation in Hongkong, kept business brisk in 2011. China’s banks colalte their 2011 results late after the end of earnings season and will announce them along with the credit growth figures for March but ICBC and China Construction Bank are expected to lead large growth in 2011 on the annual figures with even 40-50% overall growth not ruled out.
Meanwhile state run AgBank continues to take steps to grow into an aggressive lender outside rural markets despite the current thrust on rural and small town growth in Middle China appointing Jiang Chaoliang from BoCom ( the HSBC partner that likely contributed $2.5 bln in Income to HSBC)
Wang Hongzhang took over at China Construction Bank from his role inside a sub division of CBRC. The posts at CCB and AgBank had vbecome available after their chairmen moved to the Insurance and Securities Regulars in October ahead of the change in Polit buro leaders expected in 2012
Also while AgBank’s Golden Key range of Financial products in Wealth management ratcheted a four fold growth in 2011 to CnY 2 Tln and bagged awardsa t a 2011 Wealth management summit, China Construction Bank expects to add 600 outlets in Mainland China, 10,000 ATMs and pick up a bragain wealth boutique in Europe from its Cash surpluses. China has promised Europe it will help Europe’s survival efforts this year in the recent visit by German Premier Angela Merkel
AgBank opened its overseas branch in London last month while recent proposals to CBRC indicate a likelihood for a 30% discount to be introduced on First time mortgages to quickly reverse the high speed at which property market has decelerated in Shanghai and China a s a whole consequently, with projects going empty right now and developersss till holding out for the best prices on Chinese property this millenium.We will be tracking China’s Report Card this week to help you get your global investment portfolio outlook back in shape after some serious with government China bashing set the stage for an equally strong 2012 after the low GDP growth of 8.9% in December with the latest RR cut to 20.5% releasing CnY 300-400 bln for lending by Chinese Banks