Five of the oldest chinese lenders reported a reduction in their net intermediation margins and warned of the risks faced by the real estate sector in a context of slowing economy. “Profitability will continue to be pressured by high credit costs and the narrowing of intermediation margins, as the economic environment low interest rates keeps asset and investment performance under control,” he said. Nicholas Zhu, banking analyst at Moody’s.
The Chinese lenders forced to cut interest rates of the loans they grant to reinforce sectors in crisis as demand for loans decreases.
In fact, on Wednesday, Industrial and Commercial Bank of China (ICBC)the largest lender in the world, and that of Communications Co Ltd reported lower margins. And this Thursday, the China Construction Bank Corp (CCB)he Bank of China (BoC) and the Agricultural Bank of China (AgBank) reported a drop in margins – an indicator of profitability – in their annual results.
The risks that banks warn in the real estate sector
The bankers warned of the existing risks in the real estate sector. Wang Jingwu, vice president of ICBC, said at a news conference held a day after the release of its annual results that the bank would help stabilize the property market, but did not specify what kind of support it would provide.
The Chinese real estate market volatilitywhich began with policies aimed at curbing developer debt, has led to defaults and bankruptcies in several real estate companies, hurting lenders and leaving investors wondering whether state-owned real estate companies will receive more support from banks than the private ones.
The RChinese regulators are putting pressure on banks to speed up approval of new loans to cash-strapped private developers, Reuters reported earlier this week, amid lenders’ reluctance to increase their exposure to the ailing sector.
The reaction to pressure from the Chinese Government
In response to this situation, ICBC said that “will treat real estate companies equallyregardless of ownership,” Wang said. The real estate sector and its problems were also the focus of Bank of Communications Co Ltd (BoCom), which on Wednesday recorded a higher proportion of non-performing loans from real estate companies and warned of the risks for asset quality.
“The pressure on asset quality control is significant,” said Yin Jiuyong, vice president of BoCom, adding that the bank “should intensify risk control” of its businesses related to the real estate sector. The BoCom default rate for real estate loans it was 4.49% at the end of last year, compared to 2.8% at the end of 2022.
Source: Ambito
