Big four banks maintain loan target despite inflationary fears

PUBLISHED : Monday, 07 March, 2011, 12:00am
UPDATED : Monday, 07 March, 2011, 12:00am

The mainland's four largest banks expect to issue loans totalling nearly three trillion yuan (HK$3.55 trillion) this year - almost unchanged from last year - according to bankers with knowledge of the matter.

The combined loan target of the big four lenders - Industrial and Commercial Bank of China, Bank of China, China Construction Bank, and Agricultural Bank of China - suggests the banking sector aims to maintain its loan approval targets despite Beijing's efforts to contain inflation.

The big four combined extended 3.1 trillion yuan in loans last year. Normally, loans by the top four lenders account for 35 to 40 per cent of the national total and their ambitious loan targets signal credit expansion of more than 7.5 trillion yuan nationwide in 2011.

'New loans of 7.5 trillion yuan this year appear to be a big number since the central government is determined to tighten monetary policies,' said Orient Securities' analyst Jin Lin. 'The sticking point is whether the banks would have enough funds to support that loan growth.'

Mainland banks extended a record 9.6 trillion yuan loans in 2009 followed by 7.95 trillion yuan last year. In 2009, credit issued by the banks was nearly double Beijing's target of five trillion yuan while last year's number also exceeded the government's preferred quota of 7.5 trillion yuan.

A full-year loan quota is seen as a key economic tool that Beijing uses to control fixed-asset investment and consumer prices.

'The central bank initially planned to set a full-year quota of six trillion yuan,' said a banker who was informed about the policy plan.

'But the banking industry actively maintained its faster pace of loan growth.'

Officials in Beijing said recently that they would not unveil a clear-cut full-year loan quota this year, letting banks decide themselves. But they said the central bank would still play a key role in controlling loan growth by adjusting the reserve requirement ratio - the percentage of cash that banks must deposit at the central bank to hedge against risks.

A higher reserve ratio could hamper banks from extending loans freely.

Beijing has raised the reserve requirement ratio five times since November to ease inflationary pressure and curb asset bubbles.

A clutch of mid-size banks are now looking to tap the stock markets for fresh funds, a move to replenish their capital and support their future loan growth.

Among them, Bank of Shanghai and Guangdong Development Bank are seeking to float initial public offerings to raise tens of billions of yuan.

China Minsheng Banking Corp is expected to raise 27 billion yuan in a refinancing that involves share placement on the Hong Kong stock exchange and the issuance of convertible bonds at the Shanghai bourse.

Mainland banks issued total credit of 1.04 trillion yuan in January, the central bank said. This was about 100 billion yuan more than the central bank expected.

The loan figure for last month has yet to be officially announced.

The official China Securities Journal said the banks extended about 600 billion yuan in February.

Credit binge

Mainland banks extended 7.95 trillion yuan in loans last year

This was down on 2009, when the figure, in yuan, hit a record: 9.6tr yuan