Banks to trim loan size in 2011

10:18, January 12, 2011      

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Some Chinese banks plan to reduce the size of their loans by 10 to 20 percent this year, even though China's central bank has not clarified policies for 2011, the 21st Century Business Herald reported Tuesday.

China Construction Bank has reduced its loan target by 10 percent from 2010, and the situation is the same with some other banks, except for Bank of China, the paper said, citing an insider from a State-owned bank.

Bank of China might continue its loan spree by lending about 800 billion yuan in 2011, the insider said. But this was not confirmed by the bank, the newspaper added. The bank issued loans totaling about 700 billion yuan in 2010, according to the paper.

Another insider from a listed joint-stock bank told the newspaper that its bank plans to lend 170 billion yuan in 2011, a 10 percent to 20 percent decrease from 2010.

"Our bank's control over our loan size has tightened to an unprecedented level," the insider said. "We are required to supervise the lending scale by month; but the fact is, we are looking at it nearly every day."

New yuan-denominated lending in China reached 7.95 trillion yuan ($1.2 trillion) in 2010, the People's Bank of China (PBOC) reported Tuesday. The figure surpassed the central bank's lending target of 7.5 trillion yuan for last year.

The PBOC has previously conveyed that a reasonable lending growth should be within 12 percent to 13 percent in 2011, according to the insider from the State-owned bank.

However, banks' shrinking lending plans come at a time when local governments are ambitious about the 12th Five-Year Plan (2011-2015), creating a dilemma for local bank branches.

"You can reject loan applications from local governments, but they may withdraw their fiscal deposits at your bank," said a person in charge of lending at a joint-stock bank.

It would be hard for banks to deflate the lending balloon without a slowdown in fixed-asset investments, he said.

Alongside a scale-back in lending, some Chinese banks are thirsty for capital because of tighter requirements from the China Banking Regulatory Commission.

Industrial Bank plans to issue up to 15 billion yuan in junior bonds, and the Agricultural Bank of China wants to raise up to 50 billion yuan through the same channel. China Minsheng Banking Co Ltd aims to raise no more than 21.5 billion yuan through additional issues in the A-share market.

China International Capital Co Ltd expects listed banks' refinancing size to reach 160 billion yuan in the following two year.

Source:China Daily
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