Jamesb101.com

commentary on Politics and a little bit of everything else

Are China's banks actually having trouble?

The Wall Street Journal is reporting in a little noticed piece, that China’s bank’s may be having trouble, like everyone did, six months ago……The piece goes on to say that their profits may in fact be just driven by expansion and may not reflect the sum of their assets?…hum??????

Didn’t they lend this country a boat load of money a few months ago?

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November 2, 2009 - Posted by | Breaking News, Media, Politics, The Economy | , , ,

11 Comments »

  1. I don’t subscribe to the WSJ so I can’t read the full article, could you go more into detail, the article sounds interesting.

    Comment by BenjaminDOG | November 2, 2009 | Reply

  2. An old article, but very interesting:

    http://seekingalpha.com/article/25956-the-inevitable-collapse-of-china-s-banks

    Comment by BenjaminDOG | November 2, 2009 | Reply

  3. well i don’t subscribe either…but your link does a really good job……
    we’ll have to wait a day or two for them to release the whole text…….interesting isn’t it?……the media does believe in quit a few myth’s it seems……

    Comment by jamesb101 | November 2, 2009 | Reply

  4. quite a few…..sorry…..

    Comment by jamesb101 | November 2, 2009 | Reply

  5. Here’s the piece in it’s entirety……BDog……

    Keeping up appearances is about to get harder for China’s top banks, and the country’s banking regulator.

    Things still look good on the surface. Third quarter profits rose year-to-year at China’s top four listed banks, with Bank of China, China Construction Bank and Industrial & Commercial Bank of China each coincidentally reporting a 19% gain.

    This despite a narrowing of net interest margins, by between 60 and 80 basis points, since the government reduced the spread between deposit and lending rates a year ago. A massive expansion in bank loans has more than compensated for that inbuilt profit reduction.

    What such robust growth masks, though, are cracks appearing in the banks’ capital positions. This puts the China Banking Regulatory Commission, which plays an important role in guiding how much banks can lend each year, in a tricky position as the year comes to a close.

    Should it unleash another bank-lending splurge next year to help support the economy and bank profits, or should regulators slow things down to focus on protecting bank balance sheets?

    Capital adequacy ratios remain comfortably above the regulator’s 8% baseline, but they’re in decline. At Bank of China, which has seen the fastest lending growth of the big four this year, capital adequacy had fallen to 11.63% at the end of September, from 13.43% at the start of 2009.

    Meanwhile, a risk already flagged by the CBRC is the banks’ reliance on subordinated debt — considered a low-quality source of capital — for funding.

    Take Bank of China’s long-term subordinated bonds out of its capital adequacy calculation, for example, and its ratio would be about 1 percentage point lower. Subordinated debt is potentially a systemic risk, too, with at least half the issuance held by other Chinese banks.

    A concern that’s accompanied the rise in lending is that large parts of the new loans made this year will eventually run into trouble. Here too, things appear tidier than they may actually be: Chinese banks hold high levels of so-called special mention loans, which are often rolled over or extended even when they’ve been non-performing for some time.

    Aware of these frailties, but not wanting to be too strict, the CBRC has recently wavered. Having this summer proposed tough rules over the classification of subordinated debt, it watered down the proposals last month.

    Because banks front-load much of the year’s lending, a slowdown in lending rates at the big banks is naturally occurring. Their share of new lending dropped to just 21% in September from around 70% in the first half of 2009.

    For the CBRC, the truly delicate decision is going to be whether to see to it that this slowdown continues through the new year.

    Write to Andrew Peaple at andrew.peaple@dowjones.com

    Corrections & Amplifications: The China Banking Regulatory Commission plays an important role in guiding how much banks can lend each year but does not set a quota for bank lending. An earlier version of this article incorrectly said the banking regulator sets a quota.

    Comment by jamesb101 | November 2, 2009 | Reply

  6. front loaded and a lot of high turn over?……whoa?

    Comment by jamesb101 | November 2, 2009 | Reply

  7. I don’t really no if I mean this, but it would be interesting to see if that bubble bursts. I think if it hapened the chinese would be cashing in on our federal debt to pay for their own debt. Because essentialy their banks are quasi-state owned (whatever that means) so what ever bad debt they have the Chinese Government will have to pay the tab. Now that sounds real familiar, where have I seen that before???

    Comment by BenjaminDOG | November 3, 2009 | Reply

  8. that might not be good for the US…….

    You catch the election results?

    Comment by jamesb101 | November 3, 2009 | Reply

  9. Yeah,

    Who won Suozzi or Mangano???

    I know you said that most of the elections were about local issues oand anger at incumbents which I agree. But, there was one election that was about national issues (the upstate 23rd district). That woman (Scaffaza) was crucified by the right and clearly showed how the 2010 elctions are going to be like. So much for hope in our political system it is about to get seriously bloody. The gloves have come off and have been relaced by brass knuckles.

    Comment by BenjaminDOG | November 4, 2009 | Reply

  10. Actually…I’m hoping the GOP swerves to the right…….…

    Comment by jamesb101 | November 5, 2009 | Reply

  11. I guess I’m not the only one not too happy with Suozzi, huh?

    Comment by jamesb101 | November 5, 2009 | Reply


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