360° Coverage : China Weakness No Match For World's Largest Bank

2 Updates
China Weakness No Match For World's Largest Bank
Photo Credit: Forbes Business

China Weakness No Match For World's Largest Bank

Mar 30 2014, 12:58pm CDT | by

China’s economy may be slipping, but tell that to the world’s largest bank, which also just happens to be Chinese. Profits might not be growing as much as they were a year or two ago, but that’s...

Filed under: news

 
 
 

21 weeks ago

China Weakness No Match For World's Largest Bank

Mar 30 2014, 12:58pm CDT | by

China’s economy may be slipping, but tell that to the world’s largest bank, which also just happens to be Chinese.

Profits might not be growing as much as they were a year or two ago, but that’s stating the obvious. The bears will point that out, as it makes more dramatic television and better reading on the op-ed pages. The good news here is that non-performing loans are below the national average.

Over the weekend, the trillion dollar Industrial and Commercial Bank of China reported a 10.2% increase in 2013 profits to $42.3 billion. The Wall Street Journal yawned at the numbers. What was most interesting in the numbers was the data on non-performing loans.  ICBC recently watched one of its trust fund products default on more than $400 million, requiring a government bail out after a bad investment in a municipal coal producer.  The bank has not been the source of good news. Nor has the entire financial sector in China.  Still, despite problems in the real estate markets, non-performing loans as a portion of the bank’s real estate portfolio was just 0.72%.

Overall, ICBC’s non-performing loans ratio was 0.94% , up just 0.09 percentage points from the previous year.  China’s non-performing loan data comes from the government, which basically runs the entire financial sector in the country. Many naysayers believe that the data is inaccurate, arguing that Beijing is not going to make its banks look bad. If China’s data is correct, then non performing loans in China’s banking system is below that of the United States and the world average, according to the World Bank.

“China’s financial sector is going through a tough patch, but we don’t think it is a problem in the near or medium term for the economy,” Allan Conway, Head of Emerging Markets Research at Schroders told FORBES in New York last week.

China’s financial sector, led by the People’s Bank of China (PBoC), has been made more aware of the shaky ground on which it walks. Last summer, money market rates skyrocketed to double digits due to local fears of a pending crisis at municipal lenders.  The PBoC has pledged support of those smaller, provincial banks, but it comes with a price.  The central bankers are supposedly carefully watching the loan portfolios at government lenders.

ICBC, the world’s largest bank by market cap, cut lending in risky sectors facing overcapacity, like solar, auto and real estate. Last year, ICBC’s outstanding loans to local governments, real estate developers and industry declined by 94.3 billion yuan, 8.6 billion yuan and 19.9 billion yuan, respectively, the bank said on Friday.

ICBC is closely tied to China’s real estate market, too. In their personal loan segment, mortgage lending accounts for 55.6% of the bank’s lending. Mortgage lending rose 12.7% in 2012, the most recent year for compiled data.  That same year, ICBC wrote-off 214 loans to commercial developers valued at 9.4 billion yuan ($1.5 billion), up from 144 write-offs worth 6.4 billion. Commercial real estate trailed wholesale/retail lending and manufacturing loans, the worst hit of them all, in the impairment category for ICBC in 2012, according to the bank’s Annual Report.  Commercial real estate lending accounts for 8.3% of the bank’s corporate lending.

On balance, China’s average real estate price is in line with historic norms. But when major eastern seaboard cities are thrown into the mix — especially Shanghai and Hong Kong — China’s housing market looks to be bubbling over.  And while China’s real estate bubble is different from the leverage induced bubble in the U.S. that led to the 2008 foreclosure crisis and economic turmoil, the market has been treating real estate as one of two linchpins threatening to derail China.

According to government data reported on Sunday by Xinhua newswire, China’s residential real estate market is showing signs of cooling down, with some new housing projects cutting prices. Cuts were reported in the cities of Beijing, Hangzhou and Shenzhen, where property sales have been strong for years. A new real estate project in suburban Beijing priced its apartments lower than the market estimate by 12% or about 3,000 yuan ($490.2) per square meter to 21,000 yuan in mid-March.

Since 1998 when housing reform began in China, the sector has become more market-oriented, with rapid growth in residence investment and new supply coming on line in cities with high demand, like Shanghai and Hong Kong.  Low interest rates in the country, and a very volatile casino-like securities market, keep middle class and richer Chinese in the housing market, too. Investment in urban properties rose from 431.1 billion yuan in 1998 to 5.9 trillion yuan in 2013, with annual growth of 19%, according to Wind Information Co.

ICBC remains a victim of both housing and a developing credit crisis.  The bank’s  H-shares are down 6.71% year-to-date ending March 28, underperforming the MSCI China Index by around 300 basis points.

See: Prepare For Pop Of China Property Bubble – China Daily

China’s Biggest Banks Post Slower Growth – WSJ

China Developers Face End Of Easy Money – Bloomberg

World's Largest Debtor Governments, 2013

Source: Forbes Business

 
Update
2

1 day ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

2 days ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies o ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Modi discusses sickle cell disease in Japan
Kyoto, Aug 31 (IANS) Indian Prime Minister Narendra Modi Sunday discussed cooperation with Japan to combat sickle cell anaemia, officials said.
 
 
Modi, Abe strike chord; Kyoto to help make Varanasi smart city (Intro Roundup)
Kyoto, Aug 30 (IANS) Warmth, mutual admiration and convergent views marked the meeting between Prime Minister Narendra Modi and his Japanese counterpart Shinzo Abe Saturday as India hoped the two sides would strive to achieve in five years the unrealised potential of the past five decades.
 
 
Modi, Abe strike chord, India hopes ties reach full potential (Roundup)
Kyoto, Aug 30 (IANS) Warmth, mutual admiration and convergence of views marked the meeting between Prime Minister Narendra Modi and his Japanese counterpart Shinzo Abe Saturday as India hoped the two sides would strive to achieve in five years the unrealised potential of five decades.
 
 
Modi in Japan: Kyoto-Varanasi partnership pact inked
Kyoto, Aug 30 (IANS) Indian Prime Minister Narendra Modi began a five-day visit to Japan Saturday, a day that saw the inking of a partnership agreement between Varanasi, one of the oldest continuously inhabited cities in the world, and Kyoto, which was the capital of Japan for over 1,000 years.
 
 
 

Latest from the Network

UN soldiers escape Syrian rebels
Damascus, Aug 31 (IANS) A group of 40 Filipino UN soldiers abducted by Islamist militants in Syria's Golan Heights escaped Sunday. Syrian rebels Saturday had surrounded two groups of Filipino soldiers working for a UN...
Read more on Politics Balla
 
Modi regretting axing talks with Pakistan?
Islamabad, Aug 31 (IANS) Indian Prime Minister Narendra Modi appears to be having second thoughts on his decision to cancel foreign secretary level talks with Pakistan, a newspaper said Sunday. "Surprised by the...
Read more on Politics Balla
 
US sanctions not to hit n-talks: Iran
Tehran, Aug 31 (IANS) The new US sanctions against some Iranian entities will not hit negotiations over Tehran's nuclear programme, President Hassan Rouhani has said. The US Friday imposed sanctions on a number of...
Read more on Politics Balla
 
Modi visits Buddhist temples in Kyoto
Kyoto, Aug 31 (IANS) Indian Prime Minister Narendra Modi visited two prominent Buddhist temples here Sunday on the first full day of a five-day visit to Japan that will later him to Tokyo. Modi first went to the Toji...
Read more on Politics Balla
 
Modi discusses sickle cell disease in Japan
Kyoto, Aug 31 (IANS) Indian Prime Minister Narendra Modi Sunday discussed cooperation with Japan to combat sickle cell anaemia, officials said. An external affairs ministry spokesman said Modi discussed treatment of...
Read more on Apple Balla
 
Modi visits Toji temple in Kyoto
Kyoto, Aug 31 (IANS) Indian Prime Minister Narendra Modi visited the Toji Buddhist temple here Saturday. External affairs ministry officials said Modi went around the eighth century temple in the company of the chief...
Read more on Politics Balla
 
Top Saudi cleric warns against 'deceitful' jihad
Riyadh, Aug 31 (IANS) Saudi Arabia's top cleric Sheikh Abdulaziz Al-AsShaikh has given a call to Muslim youth against following "deceitful" claims of jihad by shadowy groups with deviant principles. Grand Mufti Sheikh...
Read more on Politics Balla
 
English Premier League standings
London, Aug 31 (IANS) Following are the English Premier League standings after Saturday's matches (tabulated under games played, won, drawn, lost, goals for, goals against, points), according to Xinhua. Chelsea...
Read more on Sport Balla
 
Taliban killed 11 people in Afghanistan
Kabul, Aug 31 (IANS) Taliban militants killed at least 11 civilians in Farah province of Afghanistan early Saturday, officials said. Jawid Afghan, a provincial governor spokeman, said the victims were on their way to...
Read more on Politics Balla
 
Lily Allen pens 'good' songs when unhappy
Los Angeles, Aug 31 (IANS) Singer Lily Allen believes she writes her songs well when she is not in the best of her moods. The 29-year-old took a break from the industry in 2009, when she married painter and decorator...
Read more on Celebrity Balla