Loan Woes Continue For Big Four Banks


The four largest commercial banks in China extended less than 20 billion yuan of new loans during the first 11 days in March, and except for Industrial and Commercial Bank of China (ICBC) (601398, 1398.HK), the other lenders reported negative new loan growth, reports
Although Chinese banks had obtained 1.6 trillion yuan worth of deposits in February, the big four banks attracted less than 50 billion yuan worth of deposits month to date, and some banks even reported negative deposit growth.
An insider at the credit department of one of the big four banks attributes the weak loan figures to a drop in demand by large enterprises.
According to the report, the tepid loan growth lends support to the argument that loan growth will slow in 2012, despite a rebound in new loan growth in February to 700 billion yuan.
In contrast, the scale of bill issuance surged from eight billion yuan in January to 110 billion yuan in February.
The amount of new mid and long-term corporate loans extended in February totaled 178.4 billion yuan, accounting for 25 percent of the total, down from the 40-50 percent recorded a year ago.
The loan-deposit ratio requirement reduced the ability of smaller banks to extend loans, and total new loan growth during the  first 11 days of March was less than 100 billion yuan, added the insider.
Based on the annual plans set by the banks for 2012, the four largest banks had targeted new loan growth of between 270 billion yuan and 280 billion yuan in March.
According to CICC, the drop in CPI growth in February, together with zero growth in the PPI, increased the probability of deflation in the future, leaving room for a loosening of monetary policies.
CICC predicts two to three cuts in the required reserve ratio in 2012 in order to improve banks’ ability to grant loans, and expects the central bank to lower interbank lending rates.


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