China: Real Estate Market Crisis also Hurts State Banks · Global Voices

The prolonged real estate crisis in corrodes the balance sheets of the country’s largest state, as their precarious loans are increasing, refers to a related Bloomberg report. According to the American medium, China Bank of Communications bank announced that its risk-free real estate loan index was ejected to 4.99% at the end of last year from 2.8% a year earlier. While the balance of its outstanding mortgages decreased, special reporting loans for the sector – a precursor indicator of troubled loans – increased by 23% to 9.88 billion Wan (US$1.4 billion). The largest competitor Industrial & Commercial Bank of China experienced an increase in risk loans from housing loans by 9.6% to 27.8 billion Wan. In the field of corporate loans, the index of non-performing real estate loans was the highest among all sectors. Both banks announced modest profits, as interest margins declined. Bocom scored a 2.6% drop and ICBC retreated up to 1% in Hong Kong. The results provided an insight into how the country’s largest state banks did it last year, as Beijing assigned them tasks to help strengthen the domestic economy, as well as to rescue debt-laden property manufacturers and local governments. At the same time, the slowdown of the economy has put downward pressure on interest rates. State banks have so far listened to Beijing’s call to reduce loan rates and to strengthen financial support for manufacturers. Bocom announced that China’s previous cuts in key loan rates and reductions in outstanding mortgage interest rates have affected profit margins. The bank took on 56.5% more corporate real estate bonds last year to meet the needs of contractors, she said in her statement. The ICBC maintained a “fixed and smooth” real estate loan issue and strengthened financial support for housing rental, according to its announcement. The decreases in housing prices in China deepened in February in both the sections of new and second-hand homes, stressing the challenge for authorities to rescue the damaged market. The profitability and quality of the assets of large banks are at the heart, as investors expect to measure their resilience to an economy heavily dependent on bank lending to regain its dynamics. The combined profits of China’s commercial banks increased by 3.2% to 2.38 trillion Wan last year, at the slower rate since 2020, according to official data. Unpaid unsafe loans climbed to the 3.23 trillion-wan record.