China Evergrande’s creditor Minsheng Bank pares loans to developer amid concerns about leverage, default
- China Minsheng has reduced its exposure since September to ‘within controllable range’, bank says in reply to investors
- Lender’s comments came a day after Fitch Ratings downgraded Evergrande’s rating to B with a negative outlook
China Minsheng Banking Group, a major commercial lender, said its loan exposure to Evergrande has been lowered since September last year following a scrutiny of lending to the developer, it said on the Shanghai Stock Exchange’s investor interaction platform late on Wednesday. “The risk is maintained within a controllable range.”
Investors have also retreated by selling down the stock by 27 per cent this year, clipping its market value by as much as HK$85.7 billion (US$11 billion) in the period. The uneasiness has also infected its most actively traded dollar-denominated bonds, which have slumped from 85 cents on the dollar to 69 cents in the past one month alone.
China Evergrande, which had 670 billion yuan (US$104.1 billion) of borrowings at the end of 2020, has become the lightning rod for criticism and the focus of regulatory clampdown to contain systemic risk to the mainland’s financial industry. Last August, China’s central bank and the housing ministry imposed the so-called “three red lines” to curb excessive corporate leverage among developers.
Several major lenders are said to have told their branches to avoid writing new unsecured loans to Evergrande as the developer faces bouts of liquidity squeeze. Market regulators have also ordered bank creditors to stress test their capital and liquidity buffers in case of a crisis at Evergrande.