China's big four banks see slower lending
A pledge by the government investment arm Central Huijin to continue buying shares in the banks counteracts slowing lending activity
New loans extended by the mainland's 'big four' banks slowed last month but their shares held firm after state-owned investment unit Central Huijin announced that it would continue buying their stock.
The banks extended 166 billion yuan (HK$203 billion) in new loans last month, down 23 per cent, or more than 50 billion yuan, from the previous month, the 21st Century Business Herald report yesterday, citing unnamed sources.
Chen Xingyu, a Shanghai-based analyst at Phillip Securities, expected total new loans of the four banks to drop further in the fourth quarter.
"Loan demand will continue to decline due to the slowing economy in the country," Chen said.
He added that the weakness in the economy had led to increasing bad debt risk, resulting in the banks becoming more cautious in lending.
There is an expectation the People's Bank of China will encourage banks to extend more loans in the first half of the year.
"Banks usually extend 60 per cent of their new loan target in the first half, and 40 per cent in the second half," a Hong Kong-based analyst said.
The slowdown in loan growth did not deter investors from cashing in on banks stocks yesterday after Central Huijin said it would continue buying shares.
According to a statement posted on its website late on Wednesday, Central Huijin said it started buying shares in the Industrial and Commercial Bank of China (ICBC), the China Construction Bank (CCB), the Bank of China (BOC) and the Agricultural Bank of China on Wednesday and would continue "related market operations".
Central Huijin bought 6.3 million A shares in ICBC and 18.8 million shares in Bank of China in the third quarter, the two banks announced this week.
The purchases mark the fourth consecutive quarter that the state investment arm had increased its stakes in the two big lenders.
Central Huijin also bought 22.7 million shares in CCB and 29.4 million shares in Agricultural Bank of China in the first quarter in the Shanghai market.
Shares in the banks outperformed the general market in Hong Kong, with ICBC gaining 4.05 per cent and CCB 3.1 per cent. Shrugging off the decline in the A-share market, shares in four rose yesterday in Shanghai trading, with ICBC ending 0.53 per cent higher and BOC edging up 0.37 per cent.
Chen said Central Huijin's move was a sign that the government was supporting banking stocks and the stock market.
"But practically, the impact on stock prices of the banks will not be significant as banks' profit growth is expected to slow down due to the weakening economy in the country," he added.