Tags: China | bank | property | risks

China's Agricultural Bank Said to Issue Alert About Property Loan Risks

Friday, 04 Apr 2014 06:22 AM

Agricultural Bank of China Ltd., the nation’s third-largest lender by market value, alerted its branches about credit risk from property lending, according to two people familiar with the matter.

The bank circulated a letter saying price cuts at housing projects in some smaller Chinese cities had caused a panic in the property market, according to the two people, who asked not to be identified because the notice wasn’t public. The letter encouraged branches to take steps to avoid credit risk but demanded no specific measures, the people said.

The collapse of Zhejiang Xingrun Real Estate Co. with 3.5 billion yuan ($563 million) in liabilities last month fueled concerns that debt could overwhelm more developers. The government of Fenghua city, where Xingrun is based, said March 19 it met with officials from six lenders to discuss the company’s debt. Agricultural Bank is one of Xingrun’s creditors, according to the city’s government.

“Early signs of the property market cooling may have emerged and we continue to see the property sector as the top risk for China’s economy,” Zhang Zhiwei, chief economist at Nomura Holdings Inc. in Hong Kong, wrote in an e-mail today. “China’s property sector is significantly overinvested.”

China’s home sales fell 5 percent in the first two months of the year from the same period last year, the statistics bureau reported March 13. That compared with an almost doubling in sales in the first two months of 2013.

Bad Loans

Agricultural Bank’s loans to property companies amounted to 533 billion yuan last year, accounting for 7 percent of total outstanding loans, according to the company’s annual report. Mortgage loans were 1.29 trillion yuan, or 18 percent of the total, the report showed.

A Beijing-based press officer at Agricultural Bank declined to comment when contacted by phone today. The lender’s property lending policy was stable and the company will strengthen risk controls over loans to the industry, Agricultural Bank said in a February statement.

The China Banking Regulatory Commission sent out a notice last month urging lenders to better manage soured assets, the Shanghai Securities News reported today, citing unidentified people. Banks must set reasonable annual targets for controlling non-performing loans, according to the newspaper.

Chinese banks’ nonperforming loans increased for the ninth straight quarter in the three months through December to the highest level since the 2008 financial crisis, CBRC data show.

Two phone calls to the regulator’s press office in Beijing went unanswered.

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Agricultural Bank of China Ltd., the nation's third-largest lender by market value, alerted its branches about credit risk from property lending, according to two people familiar with the matter.
China,bank,property,risks
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2014-22-04
Friday, 04 Apr 2014 06:22 AM
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