Chillin' out till it needs to be funded
The Bank reported profits of $19.3 bln or RMB (CnY)122bln for the full year despite significant headwinds as the CBRC asked the top 4 Chinese Banks to redenominate another CnY 1.8 Tln ($286bln) in bad loans from Local Governments from the misguided AAA ratings to the near junk rating baskets and account for the risk currently.
Bank results season, always delayed when it comes to collating year end data for China’ s banks was immediately preceded by a dire warning by the regulator that Bad loans down to 1.1% of Total Assets in 2010 was likely to jump up to 1.9% for the 2011 data with provisions moving up from CnY287 bln to 299 bln in December for the CBRC data reported in February.
There seems to be some confusion about the data for China Construction Bank as well which was earlier reported to be planned for Friday but only AgBank results were reported for the week.
The tidings for the year as a whole are pretty much bullish with Net Interest yields of 2.85% and a conventional NIM of 2.73% a significant 20 bp improvement over 2010. The net forecast of CnY 130 bln was too much for AgBank to achieve though and with growth shot, standalone Q4 performance which was much worse was suddenly hard to come by in media push / analyst follow on the release.
Credit data for the first fortnight of the month as usual underscores the choppiness due to the year of the dragon and meagre reporting till the month end when numbers look much better for new credit.
Still, the Big 4 and the other private lenders doing well are likely to not achieve the First quarters targets of 2 Tln Yuan, with March only 800 bln Yuan and the Feb data obviously a blank slate compared to the other months
AgBank’s own NPL ratio was down to 1.55% from 2.03% as China underwent a surge in growth in 3F loans – Farms, Farmers and (small) firms) apparently a policy push leading to almost CnY 5 Tln in loans to agro related industries and farmers. CBRC annual report is also expected next month RRR for rural branches was reduced at AgBank to 18.5% agst the bank’s urban rqmt of 20.5% the Rural RRR now applies to 944 outlets of the bank(Reuters) Premier Wen Jiabao has also added new regulations at the recent Congress for lending to consider both profit and risk control equally as also strict supervision of recruitment appointment and evaluation of senior bank managers to create a new tribe of socialist bankers
On the property front, the regulators are shifting attention to the quality of affordable housing while targeting completion of 5 bln units and starting of 7 bln units for the year while residential prices are still to fall in the Shanghai and other major markets, expected to go down 30% more
Back to AgBank, the new Chairman committed to maintaining the Dividend payout and reiterated there would be no immediate Capital raising as CCB makes plan for an IPO after the banks’ rise in NPLs. Its announced figures accounted 7.1% of its loan assets to LGFVs with its assets itself growing to almost $1T at CnY5.6 Tln Bad loans at Top 5 banks were up to 300 bln Yuan on December 31. Canadian Globe and Mail reported ( from FT’s lex) that AgBank’s loan book grew by 14% but loan impairments grew 60% in 2011 to 4.1% of the book . The bank reported 140 bln Yuan in matured govt loans at the end of 2011 that are off the books except for the LGFV loans from the 400 bln Yuan portfolio that were rolled over to new maturities Banks Total Assets are CnY 11.68 Tln deposits dropping in Q4 to a annual 8% growth at CnY 9.63 Tln. 3F loans also includded SME loans whose total book is up to CnY 575 bln ( $100 bln). Provisions are up 48% to 64 bln yuan. Though analysts differ, Consumer banking as avered by HSBC and Deutsche could also see a boom in China in 2012. Deposits grew by 734 bln and Loans by 672 bln
The bank’s last year’s CnY 94.8Bln was a huge improvement on its 2009 score of 64 Bln and Q4 profits for 2009 and 2010 were 21 and 24 bln Yuan respectively. Its first three quarters this year had already outrun last year’s profits at a 100 bln yuan and the Q4 thus reporteda lower 22 bln Yuan as LSFs / LGFVs were posted back to the Balance sheets. NIMs and Fee income were also much higher in Q3(China wins again!)
Business China also reports the same from Chairman Jiang Chaoliang’s post results conference:
Experts estimate the bank has a 38.6 billion yuan funding gap, the biggest among 14 listed lenders in China.
The Chinese bank’s capital adequacy ratio stood at 11.94 percent in 2011, compared with 11.59 percent a year earlier, while the lender’s non-performing loan ratio declined to 1.55 percent last year from 2.03 percent in 2010, according to its earnings report.
CBRC and SAFX in the meantime continue to target a higher yuan reference rate at below 6.29 while trades continue to happen at the lowest end of the 5% reference range for various business transactions
Local media reports show the difference in concerns culturally as the bank defended its higher porfits as not a result of usury vehemently seemingly and headlines focussed on the daily profits of 300 mln Yuan. Seemingly bank grew well below the growth in the Corporate Economy in the same period in terms of profits. Income disparities continue between State owned banks and others with 3 top execs at ABC earningnearly a 1 mln Yuan or more while the Minsheng Bank Chairman took home CnY5.16 mln Smaller Minsheng And SDB grew faster than the big 4 this year Minsheng reporting profits up 60% to 28 bln yuan or $4.42 bln
Ping An and China Life hold 1% and 0.4% of AgBank , and Huijin that owns more than 60% in CCB holds only 40.12% in AgBank growing Private Banking by 75% and planning to issue 10 bln Yuan in Subordinated bonds this year. BOC has set up a second headquarters in Shanghai in the meantime exclusively for Yuan trading and dealing with institutional clients. BOC has also sufferd losses on European debt in 2011 when results come out this week.
AgBank is paying 1.315 RMB per 10 shares as cash dividend in 2011 Meanwhile the Kuwait SWF continues to hold its stake in the bank after it completes three years from the IPO date. Taiwanese banks are looking for a capital injection this year and talks between banks are raising hopes that Chinese banks will pick up suuch cross holdings in Taiwanese banks to ease trade channels. Aussies joined the Yuan swap club, signing a $30 bln currency swap with their largest customer.
Citi sold its stake in Shanghai Pudong for $668 mln valuing the bank at approximately $30 bln. They have launched new Card operations in China recently and they already have their own direct operations in China, the investment sale probably tied to their attempt to pay a larger 50 cent dividend this year.