The mainland's fourth-largest lender, Agricultural Bank of China, said that even if mainland home prices dropped 50 per cent, its ratio of non-performing loans to property developers would rise only half a percentage point.
'We are well prepared for risks within China's real estate market,' said chairman Xiang Junbo (pictured) in a post-result briefing in Hong Kong yesterday.
Non-performing home mortgage loans would rise only one percentage point if the real estate market price dropped by 50 per cent, the bank said.
In its first year as a publicly traded company, the bank reported on Tuesday that profit was up 46 per cent to 94.9 billion yuan (HK$112.55 billion), driven by rises in both interest and fee incomes. Net interest margin reached 2.57 per cent, up 0.2 percentage points year on year.
Sheng Nan, an analyst at UOB Kay Hian, said the credit risk assessments from the bank were in line with other banks' stress test results.
But he cautioned that the stress tests only considered the isolated factor of a downturn in the real estate market, and did not include contractions in the commodities and construction markets.
In its results briefing yesterday, the bank said its ratio of non-performing loan ratio relating to developers was 1.25 per cent at the end of last year. For its mortgage book, the ratio was 0.65 per cent.
The bank's shares rose 2.66 per cent, or 11 HK cents yesterday, to end at HK$4.24, outperforming a 1.7 per cent rise in the benchmark Hang Seng Index. Its A shares gained 0.36 per cent, or 10 fen, to 2.75 yuan.
The bank proposed a dividend of 54 fen per 10 shares for the second half of last year, bringing its dividend payout ratio to 35.77 per cent. This was at the lower end of the bank's dividend payout guidance of 35 per cent to 50 per cent for last year, said Timothy Li, an analyst at Core Pacific-Yamaichi. Li Zhenjiang, the bank's secretary to the board, said the bank planned to keep the payout ratio within the range of 35 to 40 per cent for next year.
Zhang Keqiu, the general manager of finance and accounting department, said the bank expected a decrease in total loans this year, but this would not hurt the bank's interest-based income because of higher rates on the mainland.
The bank's non-performing loan ratio to local government financial vehicles rose 0.43 percentage points to 1.49 per cent at the end of last year due to stricter calculation rules set by the China Banking Regulatory Commission, Zhang said.
In 2008, provinces that lacked tax revenues to pay for stimulus schemes began to turn to state-owned banks.