February Credit May Be Less Than 700 Billion Yuan, Q1 New Loans Will Be Below Expectations
The newly added loans of 70 billion yuan in January were lower than market expectations, and it is also very likely that bank credits in February will follow suit. On March 1st, it was learned by China Securities Journal that as of February 24th, the newly added loans in the banking industry were approximately 60 billion yuan.
Industry insiders estimate that the newly added RMB loans in February will be within 70 billion yuan. This person stated: "According to the previous credit rhythm arrangement by the central bank, unless there is a surge in credit in March, it will be highly probable that the newly added loans in the first quarter will be below the expected target (2.4 trillion yuan)."
New Loan Continues to Be Weak
Contrary to the monetary easing expectations released by regulatory agencies, since January, newly added loans have not skyrocketed significantly. Since 2009, the newly added loans in the first month have always exceeded one trillion yuan. However, this year in January, the newly added loans of 730 billion yuan came as a surprise to the market.
A bank insider told China Securities Journal that from the current data observation, bank credits in February may continue to be lower than expected. According to the most optimistic estimation, the newly added loans of the four major banks—ICBC, ABC, BOC, and CCB—in February are about 20 billion yuan. "Based on the proportion of newly added loan disbursement since the fourth quarter of last year, the total loans for the whole month of February will be around 70 billion yuan," said an industry insider.
An insider from the banking sector revealed that recently, the central bank has allowed the five major state-owned commercial banks to increase loan disbursement in the first quarter, with the amount tentatively set at a 5% year-on-year increase. This year, the overall credit arrangement specified by the central bank continues to follow the rhythm of "30%, 30%, 20%, 20%" for the four quarters from last year.
Analysts believe that according to the total goal of 8 trillion yuan, the newly added loans in the banking industry in the first quarter will be around 2.4 trillion yuan, but the newly added loans in the first two months were only about 1.4 trillion yuan. Unless there is another surge in March, the newly added loans in the first quarter will be below the expected target.
Credit Demand Declines
An insider from a large state-owned bank stated that the effective demand for loans is indeed decreasing, and sometimes even with available quotas, they cannot be utilized. "The demand for fixed asset investment is declining, which may be related to enterprises starting operations later after the Spring Festival. Moreover, due to the unclear economic situation in Europe and America, some outward-oriented enterprises are beginning to contract their operations and reduce investments."
This person introduced that in the fourth quarter of last year, many banks were compressing the scale of local financing platform loans, "After the platform loans are recovered, banks often will not add new credit lines."
He said that enterprises are now postponing some funding needs. Everyone has expectations regarding the reduction of the reserve requirement ratio and interest rates, so from a financial cost perspective, enterprises are not eager to apply for loans from banks.
Banking sector insiders expressed that the constraints of the loan-to-deposit ratio and capital adequacy ratio have somewhat curbed banks' enthusiasm for lending. Since the fourth quarter of last year, deposit outflows have caused some banks' loan-to-deposit ratios to "touch the line", making deposits a significant factor affecting bank lending. Many banks have listed "deposit establishment" as the focus of their business operations for this year.
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