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    600016   CNE0000015Y0

CHINA MINSHENG BANKING CORP., LTD.

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Chinese banks to feel fund-raising pain as investors fear bad loans

12/27/2020 | 07:56pm EST
People walk past the skyline of the Central Business District (CBD) on the day that Chinese leaders elaborate on their 14th Five-Year plan in Beijing

BEIJING (Reuters) - Chinese banks are expected to face headwinds raising funds next year as profit-conscious investors cling to the sidelines, expecting a wave of bad loans to hammer the sector and erode already slimming margins.

The sector is ending its worst annual performance in years after putting aside record provisions due to COVID-19 while Beijing urged banks to sacrifice profits to help the economy.

Next year as lenders end pandemic-related loan forbearance - which let borrowers suspend repayments or pay less in interest - banks must bolster their capital against loans previously not classified as nonperforming.

Big and medium-sized lenders also need to improve their capital adequacy as demanded by global and domestic watchdogs.

China's banks raised 1.2 trillion yuan ($18 billion) in the first 11 months of the year, off the pace of 1.5 trillion yuan for all of 2019, data from Fitch Ratings shows.

The 26 listed banks may need to replenish at least 1.25 trillion yuan of capital in 2021, Shenzhen-based brokerage Guosheng Securities estimates.

For a graphic on China's bad-loan ratio nears its highest since financial crisis:

https://graphics.reuters.com/CHINA-BANKS/CHART/dgkplqqmrvb/chart.png

"The pressure of capital-raising for the whole banking industry is still pretty big," said Vivian Xue, Fitch's director of Asia-Pacific financial institutions. "China's largest banks will need to raise substantial capital or loss-absorbing debt over the next few years."

The four largest - Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China and Bank of China - face a shortfall in this loss-absorbing debt of 4.7 trillion yuan by the end of 2024 to meet requirements set by the Basel-based Financial Stability Board, according to Fitch.

In the scenario, Fitch assumes risk-weighted assets including loans will grow 8% annually.

The Group of 20 big economies adopted "total loss-absorbing capacity" in 2015 as a standard to help ensure the world's largest financial institutions have the resources for any restructuring while minimising support from public funds.

For a graphic on China's big four banks face looming capital gap till 2025:

https://graphics.reuters.com/CHINA-BANKS/CHART/dgkvlqqjopb/chart.png

SMALLER BANKS

But China's more than 4,000 smaller and unlisted banks have more acute funding needs, analysts say, despite 200 billion yuan of local government special bonds this year aimed at helping recapitalise regional banks.

"Smaller banks will have a bigger gap," said analyst Wang Jian at Guosen Securities.

Fund-raising tools include tier-two bonds, perpetual bonds for bigger banks, public share offerings, strategic capital injections and government-led investments for smaller lenders.

For a graphic on China banks raise more funds via capital instruments:

https://graphics.reuters.com/CHINA-BANKS/CHART/rlgvdqqmqpo/chart.png

Despite the array of options, banks face challenges in gaining investors' interest.

"Small banks will have trouble winning recognition from investors," said analyst Wang Yifeng at Everbright Securities.

Investors have been lukewarm to bank IPOs due to their poor share performance, said Dai Zhifeng, an analyst with Zhongtai Securities.

Mainland banking shares have fallen 6.5% this year, even as China's broader market surged 22%.

Concern about credit risks at smaller lenders, following the seizure of Baoshang Bank, has also chilled confidence in capital instruments issued by regional banks, Dai said.

On the retail end of fund-raising, mainly via deposit products, big lenders will be favoured over regional ones.

Urban and rural commercial banks will have a harder time attracting deposits due to a weak client base and regulatory crackdowns on high-yield deposits.

(Reporting by Cheng Leng, Zhang Yan and Ryan Woo; Editing by William Mallard)

By Ryan Woo, Cheng Leng and Zhang Yan


ę Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
AGRICULTURAL BANK OF CHINA LIMITED 0.69% 2.91 End-of-day quote.8.58%
BANK OF CHINA LIMITED 1.01% 3 End-of-day quote.6.76%
CHINA CONSTRUCTION BANK CORPORATION -0.17% 5.86 End-of-day quote.8.52%
CHINA MINSHENG BANKING CORP., LTD. 0.00% 3.96 End-of-day quote.1.54%
EVERBRIGHT SECURITIES COMPANY LIMITED -0.41% 14.46 End-of-day quote.-3.15%
GUOSEN SECURITIES CO., LTD. 0.53% 11.36 End-of-day quote.-1.05%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) -0.04% 6.3476 Delayed Quote.0.03%
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Financials
Sales 2021 180 B 28 373 M 28 373 M
Net income 2021 33 859 M 5 337 M 5 337 M
Net Debt 2021 - - -
P/E ratio 2021 5,25x
Yield 2021 5,55%
Capitalization 162 B 25 528 M 25 533 M
Capi. / Sales 2021 0,90x
Capi. / Sales 2022 0,86x
Nbr of Employees 59 262
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China Minsheng Banking Corp., Ltd. Technical Analysis Chart | 600016 | CNE0000015Y0 | MarketScreener
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Number of Analysts 14
Last Close Price 3,96 CNY
Average target price 3,41 CNY
Spread / Average Target -13,9%
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Managers and Directors
Wan Chun Zheng President & General Manager
Dan Bai Chief Financial Officer & Co-Secretary
Jun Tong Zhang Chairman-Supervisory Board
Ying Xin Gao Chairman
Zhi Chun Xie Independent Non-Executive Director