Financial Industry 06 (Jun 16 - Jun 18)

Re: Financial Industry 06 (Jun 16 - Dec 18)

Postby winston » Tue Mar 06, 2018 8:48 pm

China cuts amount of funds banks are required to set aside for bad loans

China Banking Regulatory Commission ditches ‘one size fits all’ approach and will assess banks individually

The minimum loan loss provision for Chinese banks was lowered to a range between 1.2 and 1.5 times the amount of impaired loans, instead of the 1.5 times before.

Cutting provisions would mean banks have more capital and can shore up their profitability.

For those that are close to touching the 150 per cent red line now, they can use it to improve their balance sheets.


Source: SCMP

http://www.scmp.com/business/banking-fi ... -aside-bad
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Re: Financial Industry 06 (Jun 16 - Dec 18)

Postby winston » Tue Mar 13, 2018 8:19 am

Hong Kong, China bank sectors vulnerable to crisis, says Bank of International Settlements

Rising debt and property prices – two major indicators of a crisis – “flashing red”

“Canada, China and Hong Kong SAR stand out, with both the credit-to-GDP [gross domestic product] gap and the DSR [debt service ratio] flashing red.

Growth in lending by Hong Kong banks to borrowers in mainland China, which have higher credit risks.

Property related lending accounted for 45 per cent of the banking sector’s loans in Hong Kong.




Source: SCMP

http://www.scmp.com/business/banking-fi ... -says-bank
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Re: Financial Industry 06 (Jun 16 - Dec 18)

Postby winston » Tue Apr 03, 2018 8:23 am

China’s state-owned banks told to stop lending to local governments as debt crackdown intensifies

Finance ministry issues blunt directory telling state-owned lenders to curb funding for local authority projects

Source: SCMP

http://www.scmp.com/news/china/economy/ ... ments-debt
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Re: Financial Industry 06 (Jun 16 - Dec 18)

Postby winston » Wed Apr 04, 2018 8:08 am

China Banks

Regulatory crackdown on off-balance sheet items and shadow banking will likely benefit large SOE banks with sizeable deposit base as loan demand is channelled back to the formal more regulated banking system.

At the same time, asset quality has bottomed as robust economic growth had boosted corporate profit and eased indebtedness.

With growing infrastructure investment and domestic consumption loan demand, banks with strong balance sheet will benefit.

We think that China Construction Bank (CCB) will be a major beneficiary of this trend due to its strong CASA ratio and robust common equity tier-1.

A strong banking franchise, CCB is priced attractively at about 1 standard deviation below its 8-year historical mean of 1.29x. Based on Bloomberg consensus, CCB has a target price of HK$10.58, implying a 31.6% upside.

Source: UOBKH
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Re: Financial Industry 06 (Jun 16 - Dec 18)

Postby winston » Wed Apr 04, 2018 12:38 pm

China capital raising fast becoming bank elixir

HONG KONG: China’s banks exist in a capital-raising conundrum. It goes like this: Everyone is always terrified they’re about to flood the market with stock. As a result, the shares never get expensive enough to sell.

There are signs that’s finally changing.

Striking a blow for balance sheets everywhere, Agricultural Bank of China Ltd. last month announced a $16 billion private placement, the biggest additional equity sale by any Chinese company ever.

The result? Thanks to the way the sale was constructed, with government entities providing the cash, the stock surged. Other lenders from Ping An Bank Co. to China Citic Bank Corp. have also announced plans this year to sell convertible bonds.

The case for capital raising, especially for joint-stock banks, is clear. Loans are expanding, accounting standards are tightening, and credit previously hidden from the loan book is finally getting the risk-weightings it deserves.

With profits rising and asset quality improving, the time may be right to raise money. For one thing, better results helped pushed shares of at least a few lenders near valuations where regulators will let them sell stock.

A stronger capital position also assuages fears that a future increase in bad loans -- a real risk when debt is equal to 266 percent of China’s economy -- will wipe out your stock.

“You get a strengthening in your capitalized level, which will actually help you grow more loans,” said Ken Shih, a financial analyst at DBS Vickers Hong Kong Ltd.

“This year or coming one to two years will be a very good timing. If you look at the credit cycle, it’s still trending on a favorable upcycle: interest rates are going up, asset quality is still improving, corporate financing demand is coming back to the banks.”

And the government is on board. The banking regulator said last month it will change rules to support commercial banks’ sales of capital tools including perpetual bonds. It also lowered the minimum bad-loan coverage ratio, a move that helps ease capital pressure.

One reason pressure to raise capital is growing is that tighter regulations have forced Chinese banks to increase risk weightings on loans that were previously disguised as investments.

Excluding the Big Four, listed Chinese banks’ risk-weighted assets grew 11 percent last year while assets expanded just 6 percent, according to the latest available data compiled by Bloomberg. To bring the sector’s core tier 1 ratio to 10 percent -- a reasonable minimum target -- it will have to raise another 1.05 trillion yuan ($167 billion) of such capital, UBS Group AG estimates.

Here’s a QuickTake Q&A on China’s campaign to curb financial risk.

For investors, the fear of dilution from a wave of equity issuance has always been a concern, to the extent that one-time book value -- below which Chinese banks can’t sell new shares -- became a ceiling for their valuations.

That, along with concerns over unrecognized bad loans, is why Chinese banks are much cheaper than their global peers. The 20 largest Chinese lenders by market value have an average price-to-book ratio of 0.97, compared with 2.50 for banks in emerging Asia excluding China.

One route around the valuation threshold is convertible bonds. Six banks have already announced plans to sell a total of 188.5 billion yuan of such notes this year, compared with about 144 billion yuan of such offerings sold since 2003, according to data compiled by Bloomberg.

“That’s actually quite a smart solution because you avoid your sticker shock-type capital raises,” said Jason Bedford, an analyst at UBS in Hong Kong. “People often want to avoid the JSBs because they fear the minute they hit one time book, they’re going to hit the market and raise a bunch of capital. With these instruments, you can gradually convert over time.”

Strengthening the joint-stock banks’ capital position is good for their long-term stability, but for now their stocks are still being battered by concerns over tighter regulation. A persistent deleveraging campaign since late 2016 has enervated their risky but lucrative business model of relying on short-term liabilities such as certificates of deposits and wealth management products to fund lending.

Still, more broadly, the Chinese banking sector is looking healthier as the economy recovers. Net interest margins and bad loan ratios are stabilizing, and loan growth still looks strong.


The Big Four’s shares reflect such optimism: Agricultural Bank has jumped 23 percent in Hong Kong this year, while Bank of China Ltd. has gained 10 percent, dwarfing the 4 percent advance for the benchmark tracking Chinese enterprises listed in the city.

Any price pullback after capital-raising would be a good chance to boost holdings as current normalized return on equity suggests better valuations, said Claude Tiramani, a Paris-based fund manager at LA Banque Postale Asset Management SA, which has added to its position in blue-chip Chinese banks recently.

“The recapitalization process is starting,” he said in an email. “The government looks serious in its willingness to solve the banking problem and more broadly the debt problem.”

Source: Bloomberg

https://www.thestar.com.my/business/bus ... RW4ibJz.99
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Re: Financial Industry 06 (Jun 16 - Dec 18)

Postby winston » Wed Apr 04, 2018 12:38 pm

China capital raising fast becoming bank elixir

HONG KONG: China’s banks exist in a capital-raising conundrum. It goes like this: Everyone is always terrified they’re about to flood the market with stock. As a result, the shares never get expensive enough to sell.

There are signs that’s finally changing.

Striking a blow for balance sheets everywhere, Agricultural Bank of China Ltd. last month announced a $16 billion private placement, the biggest additional equity sale by any Chinese company ever.

The result? Thanks to the way the sale was constructed, with government entities providing the cash, the stock surged. Other lenders from Ping An Bank Co. to China Citic Bank Corp. have also announced plans this year to sell convertible bonds.

The case for capital raising, especially for joint-stock banks, is clear. Loans are expanding, accounting standards are tightening, and credit previously hidden from the loan book is finally getting the risk-weightings it deserves.

With profits rising and asset quality improving, the time may be right to raise money. For one thing, better results helped pushed shares of at least a few lenders near valuations where regulators will let them sell stock.

A stronger capital position also assuages fears that a future increase in bad loans -- a real risk when debt is equal to 266 percent of China’s economy -- will wipe out your stock.

“You get a strengthening in your capitalized level, which will actually help you grow more loans,” said Ken Shih, a financial analyst at DBS Vickers Hong Kong Ltd.

“This year or coming one to two years will be a very good timing. If you look at the credit cycle, it’s still trending on a favorable upcycle: interest rates are going up, asset quality is still improving, corporate financing demand is coming back to the banks.”

And the government is on board. The banking regulator said last month it will change rules to support commercial banks’ sales of capital tools including perpetual bonds. It also lowered the minimum bad-loan coverage ratio, a move that helps ease capital pressure.

One reason pressure to raise capital is growing is that tighter regulations have forced Chinese banks to increase risk weightings on loans that were previously disguised as investments.

Excluding the Big Four, listed Chinese banks’ risk-weighted assets grew 11 percent last year while assets expanded just 6 percent, according to the latest available data compiled by Bloomberg. To bring the sector’s core tier 1 ratio to 10 percent -- a reasonable minimum target -- it will have to raise another 1.05 trillion yuan ($167 billion) of such capital, UBS Group AG estimates.

Here’s a QuickTake Q&A on China’s campaign to curb financial risk.

For investors, the fear of dilution from a wave of equity issuance has always been a concern, to the extent that one-time book value -- below which Chinese banks can’t sell new shares -- became a ceiling for their valuations.

That, along with concerns over unrecognized bad loans, is why Chinese banks are much cheaper than their global peers. The 20 largest Chinese lenders by market value have an average price-to-book ratio of 0.97, compared with 2.50 for banks in emerging Asia excluding China.

One route around the valuation threshold is convertible bonds. Six banks have already announced plans to sell a total of 188.5 billion yuan of such notes this year, compared with about 144 billion yuan of such offerings sold since 2003, according to data compiled by Bloomberg.

“That’s actually quite a smart solution because you avoid your sticker shock-type capital raises,” said Jason Bedford, an analyst at UBS in Hong Kong. “People often want to avoid the JSBs because they fear the minute they hit one time book, they’re going to hit the market and raise a bunch of capital. With these instruments, you can gradually convert over time.”

Strengthening the joint-stock banks’ capital position is good for their long-term stability, but for now their stocks are still being battered by concerns over tighter regulation. A persistent deleveraging campaign since late 2016 has enervated their risky but lucrative business model of relying on short-term liabilities such as certificates of deposits and wealth management products to fund lending.

Still, more broadly, the Chinese banking sector is looking healthier as the economy recovers. Net interest margins and bad loan ratios are stabilizing, and loan growth still looks strong.


The Big Four’s shares reflect such optimism: Agricultural Bank has jumped 23 percent in Hong Kong this year, while Bank of China Ltd. has gained 10 percent, dwarfing the 4 percent advance for the benchmark tracking Chinese enterprises listed in the city.

Any price pullback after capital-raising would be a good chance to boost holdings as current normalized return on equity suggests better valuations, said Claude Tiramani, a Paris-based fund manager at LA Banque Postale Asset Management SA, which has added to its position in blue-chip Chinese banks recently.

“The recapitalization process is starting,” he said in an email. “The government looks serious in its willingness to solve the banking problem and more broadly the debt problem.”

Source: Bloomberg

https://www.thestar.com.my/business/bus ... RW4ibJz.99
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Re: Financial Industry 06 (Jun 16 - Dec 18)

Postby winston » Fri Apr 06, 2018 12:06 pm

not vested

<Research Report>G Sachs Upgrades ICBC(01398.HK) to Buy, Downgrades ABC(01288.HK) to Neutral

Goldman Sachs' latest ratings and target prices on China banks are listed as follows:

Stocks?Ratings?Target prices($)
ICBC(01398.HK)?Neutral?Buy?7.2?8.5
BANK OF CHINA(03988.HK)?Neutral?4.5?4.7
CCB(00939.HK)?Buy?9.3?10.8
ABC(01288.HK)?Buy?Neutral?4.5?4.8
BANKCOMM(03328.HK)?Sell?6.4?6.3
CM BANK(03968.HK)?Buy?37.5?42.2
CEB BANK(06818.HK)?Neutral?4.1?4.0
PSBC(01658.HK)?Buy?5.2?6.6
CQRC BANK(03618.HK)?Neutral?6.2?7.1

Source: AAStocks Financial News
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Re: Financial Industry 06 (Jun 16 - Dec 18)

Postby winston » Wed May 23, 2018 9:12 am

7 Reasons Why European Banks Are In Trouble

The Eurosystems´and euro banks´ balance sheets totaled €30 trillion in January 2018, that is about 291 percent of GDP.

European banks are in trouble for several reasons.

First, banking regulation has become tighter after the financial crisis.

Second, there are risks hidden in banks´ balance sheets.

Third, low interest rates have contributed to increasing asset prices.

Fourth, according to the ECB non-performing loans (NPLs), i.e. loans where borrowers have fallen behind in their payments, amount to €759 bn., that is 30% of the banks´ equity.

Fifth, more trouble for banks lies ahead.

Sixth, lower interest rates have posed severe problems to banks´net interest margin.

Seventh, banks in the Eurozone are still connected closely to their government.

Source: Zero Hedge

http://investingchannel.com/article/459 ... wS-j0iFOM8
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Re: Financial Industry 06 (Jun 16 - Dec 18)

Postby winston » Thu Jun 14, 2018 1:58 pm

China’s Banks Are Still in Trouble

A new lending scheme will buy some time. But it can’t fix larger problems.

By several measures, Chinese banks are strained. Their official loan–to-deposit ratio increased from 65.8 percent in June 2015 to 71.2 percent at the end of March.

New deposits peaked in 2015 and have since failed to keep up with lending growth. Last year, new loans amounted to 100.1 percent of new deposits. Through the first five months of this year, they were running at 104 percent.

With matters getting worse, the People's Bank of China has stepped into the breach. Since 2015, the PBOC has boosted lending to banks by more than 300 percent, to $1.5 trillion.

Beyond just providing liquidity, it's also pushing banks to change their lending patterns: In particular, by allowing short-term debt to expire and rolling it into loans of longer duration. Since January 2017, medium- and long-term loans have made up 85 percent of all new bank lending.

This "twist" complements a broader shift in policy. A reserve-rate cut in April was intended primarily to help banks repay existing PBOC loans. Last week, the central bank said that it would accept a wider range of lower-grade assets as collateral, including AA-rated bonds and loans to small and medium enterprises. All these measures are intended to make it easier for banks to borrow from the PBOC.

That may sound odd at a time when China is otherwise trying to reduce credit, notably by cracking down on interbank lending and wealth-management products. But as a recent report from UBS Global Research noted, due to a "sharp uptick" in issuance of institutional certificates of deposit, as well as continued PBOC assistance, wholesale funding actually increased by 1 trillion yuan last year. Far from reducing leverage, regulators are mostly pushing it into other channels.

Meanwhile, these measures are eroding banks' ability to respond to potential shocks. Earlier this year, regulators reduced the level of reserves that banks must hold to guard against bad loans, which in the short term can help boost profits. To compensate, they've also approved new tools to raise capital levels, such as convertible-bond offerings. But the amount of new capital banks will need over the next few years remains enormous.

Moreover, this surge in domestic liquidity is what drove commodity prices higher and pushed the nominal gross domestic product deflator from its trend average of 1.1 percent up to 4.1 percent in 2017. Consequently, investment as a share of the economy, which had been falling for most of the past decade, flattened last year as China fell back on smokestack industries to boost growth.

Despite intense sloganeering in recent years -- Deleveraging! Supply-side reform! Debt-to-equity swaps! -- growth in total debt continues to outpace growth in nominal GDP.

Source: Bloomberg

https://www.bloomberg.com/view/articles ... in-trouble
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Re: Financial Industry 06 (Jun 16 - Dec 18)

Postby winston » Wed Jun 20, 2018 9:21 am

China: <Research Report>UBS Foresees CN Banks amid Negative Sentiment in Short Term

MSCI China Bank Index slumped 6% in last one month, underperforming MSCI Asia ex-Japan Banks and MSCI China Index, UBS said in its report.

Among H-share Chinese banks, BANKCOMM (03328.HK) was the best performer while CM BANK (03968.HK) was the worst.

Southbound Trading capital outflowing from H-share Chinese banks suggested negative sentiment of Mainland investors.

UBS believed that the underperformance of Chinese banks was due to May's credit data, China-US trade tensions and increased bond defaults etc., and that the negative sentiment may prevail in the near term.

UBS continued to recommend defensive Chinese banks, for example CCB (00939.HK), CM BANK and ICBC (01398.HK).

Source: AAStocks Financial News
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