December 2, China’s newly extended credit in November is likely to fall on a monthly basis as data show loans granted by the nation’s 4 largest state-owned banks declined dramatically compared with a year earlier, the official China Securities Journal reported on Friday, citing unnamed banking officials.
The 4 biggest lenders collectively extended RMB 140 billion ($22 billion) of new renminbi-denominated loans as of Nov. 28, the paper said. In October, the figure was RMB 240 billion.
In view of the central bank’s latest move to lower banks’ reserve requirements, market watchers reckoned the total of newly added loans in November would be RMB 500 billion. The market had previously expected a figure closer to RMB 600 billion.
The government’s policy of fine-tuning and selective easing would help credit growth, while recent hikes in note financing may mean new loans in November are lower month-on-month, Bank of Communications (BoC) said in a report.
The People’s Bank of China, or central bank, on Wednesday said it would lover banks’ reserve requirement ratio by 50 basis points, effective Dec. 5.
Impact on Lending
Analysts questioned whether the move would prompt banks to turn added liquidity into loans in a short period, the paper said.
The BoC report said sluggish deposit growth and tighter assessment of loan-to-deposit ratios are restraining banks’ credit lending.
In November, deposits continued to leak from the banking system, and a decline in foreign exchange purchases also had a negative impact on credit growth, banking officials told the paper.
Capital requirements also curbed lending growth. The China Banking Regulatory Commission has asked banks to hold a core tier-1 capital adequacy ratio (CAR), tier-1 CAR and total CAR of 7.5%, 8.5% and 10.5%, respectively, in response to requirements set out under the Basel III Agreement.
“Banks have to proactively squeeze lending scale [to meet the regulatory requirements],” an unnamed industry insider was quoted as saying.
The paper cited unnamed sources as saying that several banks posted negative growth in newly added loans in October, including China Merchants Bank Co. Ltd. (3968.HK, 600036.SH) and Shenzhen Development Bank Co. Ltd. (SDB, 000001.SZ).