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Chinese commercial banks set to see tough times in 2009
Source: Xinhua |
January 3, 2009, Saturday
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Print Edition
Print Edition
CHINESE commercial banks face grim challenges in 2009 as external demand weakens, the growth of the domestic economy slows and corporate profitability slackens, warned a senior Chinese banker.
Ma Weihua, president of China Merchants Bank, a leading mid-sized commercial bank, made the remarks in an article carried by the latest annual issue of the well-known business magazine "Caijing."
According to Ma, great attention should be paid to lenders' exposure to risks that might have been taken on in boom times. The risk exposure could turn nasty in an economic downturn, Ma noted in the article.
He cited some risks such as external-oriented enterprises which took the brunt of the financial crisis since the third quarter of 2008. He said shrinking demand and fewer orders from abroad have led to an exports slowdown. Still worse, some senior executives of struggling businesses had fled. All these factors would threaten the safety of lenders' credit assets.
Some major industries, including steel, coal, cement, power, oil processing and coking, chemical fibers and textiles, and shipping sectors, performed unsatisfactorily, with corporate earnings declining. The liquidity of smaller enterprises remained tight, with their repayment capabilities weakening, Ma said.
The probability of default on home loans is mounting in the real estate sector, which has suffered from sluggish transactions, he added.
As Ma pointed out, between 2003 and 2007, the Chinese economy rose at an annual rate of 10.6 percent, and the banking sector also stayed on the track of rapid development.
In the first half of 2008, the 14 listed commercial banks on the Chinese mainland earned more than 230 billion yuan (US$33.6 billion) in combined net profit, a growth of more than 60 percent over the same period of the previous year.
But the rosy picture has been blurred since the second half of last year and Ma predicted that growth in banks' net profit would continue to slow down substantially in 2009.
However, Ma noted, opportunities existed amid challenges.
China has adopted a slew of measures to boost the national economy, including an active fiscal policy and a moderately loose monetary policy and strong means to grow domestic demand. They would translate into more demand for bank loans, he said.
Banks would gain as corporate demand for cash management, financial consulting and wealth management would soar.
Ma Weihua, president of China Merchants Bank, a leading mid-sized commercial bank, made the remarks in an article carried by the latest annual issue of the well-known business magazine "Caijing."
According to Ma, great attention should be paid to lenders' exposure to risks that might have been taken on in boom times. The risk exposure could turn nasty in an economic downturn, Ma noted in the article.
He cited some risks such as external-oriented enterprises which took the brunt of the financial crisis since the third quarter of 2008. He said shrinking demand and fewer orders from abroad have led to an exports slowdown. Still worse, some senior executives of struggling businesses had fled. All these factors would threaten the safety of lenders' credit assets.
Some major industries, including steel, coal, cement, power, oil processing and coking, chemical fibers and textiles, and shipping sectors, performed unsatisfactorily, with corporate earnings declining. The liquidity of smaller enterprises remained tight, with their repayment capabilities weakening, Ma said.
The probability of default on home loans is mounting in the real estate sector, which has suffered from sluggish transactions, he added.
As Ma pointed out, between 2003 and 2007, the Chinese economy rose at an annual rate of 10.6 percent, and the banking sector also stayed on the track of rapid development.
In the first half of 2008, the 14 listed commercial banks on the Chinese mainland earned more than 230 billion yuan (US$33.6 billion) in combined net profit, a growth of more than 60 percent over the same period of the previous year.
But the rosy picture has been blurred since the second half of last year and Ma predicted that growth in banks' net profit would continue to slow down substantially in 2009.
However, Ma noted, opportunities existed amid challenges.
China has adopted a slew of measures to boost the national economy, including an active fiscal policy and a moderately loose monetary policy and strong means to grow domestic demand. They would translate into more demand for bank loans, he said.
Banks would gain as corporate demand for cash management, financial consulting and wealth management would soar.
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