Several banks exposed to real estate downturn
December 15, 2014 Category Finance, Weekly
The property downturn has put local banks at the greatest risk of asset deterioration, Standard & Poor’s Financial Services said in a report. A number of regional banks had high exposure to real estate loans at a time when property prices in both the commercial and residential sectors were falling, challenging developers’ ability to repay bank loans, S&P said. Bank of East Asia’s China subsidiary has the highest stake in the sector with 30.1% of its total loans. About 21.8% of Beijing Rural Commercial Bank’s total lending is to commercial real estate. Bank of Chengdu is close behind, at 20.3%. But overseas banks such as Hong Kong-based BEA would perform considerably better than their mainland peers because the projects they financed were income-generating and in the biggest cities in the country, S&P said. Several main cities still have tight commercial vacancy rates. Beijing’s was just 4% in the third quarter, according to DTZ. In comparison, Chongqing had a 38% vacancy rate with developments in the pipeline in the next four years representing nearly 500% of the existing stock, a dangerous level of oversupply. The official sector-wide non-performing loan ratio was 1.16% in the third quarter, the South China Morning Post reports.
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