Recently Yahoo News on-line reported the following:
China’s $77 Billion Bank Rout Shows Who Pays Price for
Rescues
Bloomberg News
Tue, July 11, 2023 at 2:00 a.m. PDT
(Bloomberg) -- Investors in Chinese bank stocks are getting
a painful reminder of who’s likely to bear the brunt of government efforts to
shore up the embattled real estate sector and revive economic growth.
A Bloomberg Intelligence stock index of Chinese lenders has
tumbled 14% from this year’s high in May, erasing $77 billion of market
capitalization and leaving the industry’s shares on the cusp of their
lowest-ever valuations.
Already under pressure from China’s monetary loosening and tepid demand, banks are facing renewed scrutiny after authorities asked the sector to extend debt relief to developers as the nation’s housing crisis continues. Some Wall Street analysts also have turned cautious, with Goldman Sachs Group Inc. taking a bearish view on the industry, a move that drew a rare rebuttal from a state-run Chinese newspaper last week.
The Bloomberg Intelligence gauge of Chinese bank stocks is trading at 0.27 times book value, just a whisker away from late October’s record low. That compares with 0.9 times for an index of global peers. The China gauge was little changed on Tuesday after registering mild gains early in the trading session.
The extension of relief measures for developers “will likely provide more of a sentiment boost to investors without fundamentally easing investors’ concern on commercial banks’ credit risk on troubled developers,” Citigroup Inc. analysts including Griffin Chan and Judy Zhang wrote in a note. Banks with high mortgage exposure could be more vulnerable, they added.
Regulators said late Monday they have asked banks to ease terms for real estate firms by encouraging negotiations to extend outstanding loans, a move that aims to ensure the delivery of homes still under construction. Some outstanding loans — including trust loans due by the end of 2024 — will be given a one-year repayment extension.
Chinese lenders’ risk exposure to property amounted to about 20 trillion yuan ($2.8 trillion) as of the end of last year, including loans and bonds, accounting for about 5% of their total assets, according to estimates by China International Capital Corp. analysts including Lin Yingqi. Meantime, the non-performing loan ratio of real estate debt was about 4% at that time, they added.
The sector also stands conspicuously at the receiving end of risks from the $9 trillion debt pile among China’s local government financing vehicles as an economic recovery falters. Worries about their balance-sheet health have grown after Bloomberg News reported that top state lenders are offering LGFVs loans with ultra-long maturities and temporary interest relief to prevent a credit crunch.
Goldman estimates that 34 trillion yuan of local government debt sits on the balance sheets of banks it covers. These lenders’ combined assets account for 61% of the banking system’s total, according to the brokerage.
Chinese commercial banks’ net interest margin slid to a record low of 1.74% in March, according to data from the National Financial Regulatory Commission, below the 1.8% threshold that analysts and industry practitioners deem necessary to maintain reasonable profitability.
The lenders have seen their margins squeezed as they were urged by authorities to provide cheap loans to small businesses and home buyers to help prop up the economy. Loan demand from businesses and households, however, has weakened as a property bubble deflates and companies scale back investment.
“Since it’s hard for developers to improve their liquidity, banks still have to suffer the high possibility that most of their lending could turn into bad loans,” said Shen Meng, a director with Beijing-based investment bank Chanson & Co. “The latest policy can only help banks postpone their risk exposure.”
It’s a different picture in credit markets, where Chinese lenders’ bonds have been a sanctuary for investors even as the nation’s housing crisis unfolded and during the recent global banking turmoil.
Yield premiums over Treasuries for Chinese investment-grade dollar bonds, which are dominated by banks and financial institutions, reached a three-year low late last month and have since been hovering near the level, according to a Bloomberg index.
“Chinese bank bonds trade at very tight levels and inside of global banks as their debt is used as a proxy for the sovereign,” said Pri De Silva, a Bloomberg Intelligence analyst. “All banks are majority government-owned anyway and are crucial to public policy in China. So, they are basically treated as an extension of the central government.”
--With assistance from Dorothy Ma.
Translation
（彭博社）- 中國銀行股的投資者正在痛苦地提醒自己，在政府提振陷入困境的房地產行業和重振經濟增長的努力中，誰可能首當其衝。
彭博資訊 (Bloomberg Intelligence) 的中國銀行股指數較
5 月份的今年高點下跌了
14%，市值蒸發了 770 億美元，使該行業的股價處於歷史最低估值的分隔線。
彭博資訊 (Bloomberg Intelligence) 定中國銀行股的市盈率為 0.27 倍，距離 10 月底的歷史低點僅一步之遙。 相比之下，全球同行指數為 0.9 倍。 中國指數在交易時段早些時候小幅上漲後，週二幾乎沒有變化。
花旗集團分析師Griffin Chan和 JudyZhang 在一份報告中寫道，延長對開發商的救助措施 “可能會更多地提振投資者的情緒，但不會從根本上緩解投資者對商業銀行對陷入困境的開發商的信貸風險的擔憂” 。 他們補充說，抵押貸款較高的銀行可能更容易受到風險。
監管機構週一晚間表示，他們已要求銀行通過鼓勵談判, 延長未償貸款來放寬對房地產公司的條款，此舉旨在確保仍在建設中的房屋可交付。 一些未償還貸款 -包括 2024 年底到期的信託貸款 - 將獲得還款延期一年。
據China International Capital Corp. 的分析師包括 Lin Yingqi 估計，截至去年底，中國銀行的房地產風險敞口約為20萬億元人民幣（2.8萬億美元），其中包括貸款和債券，約佔其總資產的5%。 與此同時，他們補充說，當時房地產債務的不良貸款率約為4%。
隨著經濟復甦步履蹣跚，該行業也明顯成為中國地方政府融資平台(LGFV)9萬億美元債務的承受風險的一端。 彭博新聞社報導稱，頂級國有貸款機構正在向地方政府融資平台提供超長期貸款和臨時利息減免，以防止信貸緊縮，之後，人們對其資產負債表健康狀況的擔憂加劇。
高盛估計，受其涵蓋的銀行資產負債表上, 是有34萬億元的地方政府債務。 據券商稱，這些貸方的總資產佔銀行系統總資產的 61%。
國家金監會數據顯示，3月份中國商業銀行淨息差跌至歷史新低1.74%，低於分析師和行業從業者認為維持合理盈利能力所需的1.8%門檻。
由於當局敦促貸款機構向小企業和購房者提供廉價貸款以幫助支撐經濟，因此貸款機構的利潤受到擠壓。 然而，隨著房地產泡沫破滅和企業縮減投資，企業和家庭的貸款需求有所減弱。
北京投資銀行Chanson & Co董事 Shen Meng 表示， “由於開發商很難改善流動性，銀行仍面臨大部分貸款轉化為不良貸款的可能性很高;” “最新政策只能幫助銀行推遲風險曝露。”
信貸市場的情況則不同，即使在中國房地產危機爆發以及最近的全球銀行業動盪期間，中國銀行的債券一直是投資者的避難所。
彭博指數顯示，由銀行和金融機構主導的中國投資級美元債券, 相對於美國國債的收益率溢價上個月末觸及三年低點，此後一直徘徊在該水平附近。
彭博資訊分析師 Pri De Silva 表示： “中國銀行債券的交易水平非常緊貼並是在全球銀行內部，因為它們的債務被用作主權的代表。” “無論如何，所有銀行的多數股權都是政府所有，對中國的公共政策至關重要。 因此，它們基本上被視為中央政府的延伸。”
So,
China’s banks are asked to extend debt relief to developers as the nation’s
housing crisis continues. Lenders have been
urged by authorities to provide cheap loans to small businesses and home buyers
to help prop up the economy. Chinese commercial
banks’ net interest margin slides to a record low that will affect their
ability to maintain reasonable profit. Chinese banks are now under
pressure.
Note:
LGFVs (地方政府融資平台)were originally established to come
around a ban on municipal authorities borrowing from banks or selling bonds
directly in the market. The money they raise is spent directly on things like
infrastructure and state welfare projects that can take a long time to complete
and often have low returns.
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