February Credit May Be Less Than 700 Billion Yuan, Q1 New Loans Below Expectation
The new loans of January exceeding 70 billion yuan was below market expectations, and it is very likely that bank credit in February will be the same. On March 1st, a China Securities News reporter learned that as of February 24th, the new loans in the banking industry were approximately 60 billion yuan.
Industry insiders estimate that the RMB-denominated new loans in February will be less than 70 billion yuan. This person said: "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 new loans in Q1 fall 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, the new loans have not surged dramatically. Since 2009, the first month's new loans have all 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 the China Securities News reporter that based on the current data observation, the bank credit in February may continue to be below expectations. According to the most optimistic estimates, the new loans of the four major banks—Industrial and Commercial Bank, Agricultural Bank, Bank of China, and Construction Bank—will be around 200 billion yuan. "Based on the loan disbursement ratio since the fourth quarter of last year, the total loans for the entire month of February will be around 70 billion yuan," an industry insider believed.
An insider from the banking sector revealed that recently, the People’s Bank of China has allowed the five major state-owned commercial banks to increase their loan disbursements in Q1, with the amount temporarily set at a 5% year-on-year increase. This year, the overall credit arrangements specified by the central bank still follow the rhythm of "30%, 30%, 20%, 20%" for the four quarters as per last year.
Analysts believe that according to the total target of 8 trillion yuan, the new loans in the banking sector in Q1 will be around 2.4 trillion yuan, but the new loans in the first two months were only about 1.4 trillion yuan. Unless there is another surge in March, the new loans in Q1 will be below the expected target.
Decrease in Credit Demand
An insider from a large state-owned bank said 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. In addition, due to the unclear economic situation in Europe and America, some outward-oriented enterprises are beginning to contract 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 expects a reduction in the reserve requirement ratio and interest rates, so from the perspective of financial costs, enterprises are not eager to apply for loans from banks.
Banking insiders expressed that the constraints of the loan-to-deposit ratio and capital adequacy ratio have somewhat dampened the enthusiasm of banks to lend. 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 set "deposit establishment" as the focus of their business work this year during their annual meetings.
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