China - In late 2021 many real estate companies could not repay principal or interest on loans on time resulting in a liquidity crisis - April 12, 2022

[sharon sanders]

Breakdown of the real estate loans of the four major banks: the proportion declines, and the non-performing loans rise


2022年04月12日16:20Media



　　"China Economic Weekly" reporter Sun Tingyang | Beijing report
　　Industrial and Commercial Bank( 4.810 , 0.03 , 0.63% ) (601398.SH), Bank of China( 3.300 , 0.00 , 0.00% ) (601988.SH), Agricultural Bank( 3.080 , 0.00 , 0.00% ) (601288.SH) and China Construction Bank( 6.250 , 0.00 , 0.00% ) (601939.SH) The amount of non-performing loans and the ratio of non-performing loans in the real estate industry of these four large banks in 2021 will increase. Among them, the non-performing loan ratios of the Industrial and Commercial Bank of China and Bank of China in the real estate industry have been higher than their respective average interest rates, which means that the loans of these two banks to the real estate industry may be difficult to contribute to profits.
　　The total non-performing loans of the four major banks in the real estate industry in 2021
　　More than 100 billion yuan
　　In 2021, the real estate loans of the four major banks will account for 5.7% of total loans, down 0.4 percentage points from 2020. However, the real estate industry "contributed" 12% of the non-performing loans of the four major banks.
　　Regulators require banks to guard against real estate loan risks. On the last day of 2020, the Central Bank and the China Banking and Insurance Regulatory Commission issued the "Notice on Establishing a Management System for the Concentration of Real Estate Loans in Banking Financial Institutions", stating that in order to enhance the ability of banking financial institutions to resist fluctuations in the real estate market and prevent the financial system from excessively concentrating real estate loans. In order to improve the stability of banking financial institutions, large banks, including the four major banks, are required to account for less than 40% of their loans to the real estate industry.
　　In 2021, the proportion of loans to the real estate industry by the four major banks will be declining, and ICBC will have the largest decline. The proportion of loans to the real estate industry will drop by 0.7 percentage points to 6.5%, ranking first among the four major banks.
　　According to relevant regulations, banks measure and manage the quality of loans, and classify loans that have obvious problems with the borrower's repayment ability, are unable to repay the principal and interest in full, and still cannot recover the principal and interest after legal procedures.
　　Xiao Yi, chief photojournalist of "China Economic Weekly" | Photo
　　In the second half of 2021, the sales of commercial housing have cooled significantly, the transaction area of the land market has dropped significantly, and many real estate companies cannot repay the principal or interest of their debts on schedule, resulting in a liquidity crisis. For example, China Evergrande (3333.HK), Sunac China (1918.HK) and Kaisa Group (1638.HK), which are in the forefront in terms of trading volume, all experienced tight liquidity.
　　In 2021, the non-performing loans of the real estate industry of the four major banks will total 110.2 billion yuan, accounting for 12% of the total non-performing loans, an increase of 4.3 percentage points from 2020.
　　A year ago, the proportion of real estate loans and non-performing loans of the four major banks was close. In 2020, the real estate loans of the four major banks accounted for 6.09%, and the non-performing loans of this industry accounted for 7.7%.
　　In 2021, the non-performing loan ratios of the four major banks in the real estate industry will all increase, with Bank of China and Industrial and Commercial Bank of China reaching 5.05% and 4.79% respectively. The average interest rate on loans to businesses by both banks in 2021 is 4.08%. The non-performing loan ratio of a bank to a certain industry is higher than the loan interest rate, indicating that the interest obtained from the loan to this industry may not cover the loss of non-performing loans, and the net income obtained will be very small, or even no profit.
　　In 2021, ICBC's non-performing loans in the real estate industry will increase by RMB 17.6 billion, ranking first among the four major banks. It also ranks first among the four major banks.
　　The 2020 annual report of ICBC proposed for the first time to implement quota management on commercial real estate investment and financing, and reasonably control the total amount of commercial real estate investment and financing. In the 2021 annual report, it stated that it will strictly control risks in key areas such as the real estate industry, and strictly prevent the risks of high-leverage expansion of real estate group customers.
　　Public information shows that ICBC is the first correspondent bank of Sunac China, the second correspondent bank of Kaisa Group, and the third correspondent bank of China Evergrande.
　　Bank of China's non-performing loans in the real estate industry ranked first for two consecutive years.
　　Mysterious big customer loaned 22 billion 3 years ago
　　The non-performing loan ratio of Bank of China's real estate industry has been the highest among the four major banks for two consecutive years.
　　Bank of China's non-performing loans in the real estate industry in 2021 will be 34.694 billion yuan, the non-performing loan ratio in the real estate industry will reach 5.05%, and the proportion of non-performing loans in the real estate industry in all non-performing loans will be 16.62%. These three indicators rank first among the four major banks.
　　Non-performing loans in the real estate industry of Bank of China have been rising for two consecutive years.
　　In 2019, the non-performing loans of Bank of China in the real estate industry were only 2.936 billion yuan, ranking last among the four major banks, accounting for 35% of China Construction Bank, 29% of Agricultural Bank and 27% of Industrial and Commercial Bank of China. Bank of China's non-performing loan ratio in the real estate industry was only 0.53% that year.
　　In 2020, the loan amount of Bank of China's real estate industry will only increase by 15%, while the non-performing loans in this industry will increase sharply by 9.2 times to 29.952 billion yuan, which is 3.3 times that of China Construction Bank, 2.1 times that of Agricultural Bank of China and 1.8 times that of Industrial and Commercial Bank of China. The non-performing loan ratio of the Bank of China's real estate industry was 4.68%, rising sharply to the top of the four major banks.
　　Regarding the high amount of non-performing loans in the real estate industry in 2021, Bank of China replied to "China Economic Weekly" that it is mainly due to the tight capital chain and repayment difficulties of individual large households due to their own business problems in 2020. Risk classification standards, and reduce the loans of the corresponding enterprises to non-performing.
　　Which major clients of Bank of China have tight capital chains?
　　Bank of China is the first correspondent bank of Kaisa Group, the third correspondent bank of Sunac China, and the sixteenth correspondent bank of China Evergrande.
　　A reporter from China Economic Weekly found that among the top ten borrowers of Bank of China at the end of 2021, the 10th borrower was a real estate company with a loan balance of 22 billion yuan. Coincidentally, the bank's 9th single borrower in 2020 and the 6th single borrower in 2019 are also real estate companies, with a loan balance of 22 billion yuan.
　　From 2019 to 2021, which company has always had a loan balance of 22 billion yuan in the Bank of China? Are there bad loans?
　　In response to the question from China Economic Weekly, Bank of China replied that "commercial banks have the obligation to keep customer information confidential" and "it is inconvenient to clarify the specific relevant information of customers".
　　Bank of China told "China Economic Weekly" that for the problem of high non-performing balances in the real estate industry caused by individual customers, it will actively carry out measures such as debt restructuring, litigation settlement, disposal of collateral, bankruptcy reorganization, etc. The collection and disposal will reduce the scale of non-performing loans in the real estate industry.
　　Among the four major banks, CCB has the lowest non-performing loan ratio in the real estate industry, only 1.85%. It is the only company among the four major banks with a non-performing loan ratio below 2%, and the bank's non-performing loan ratio in the real estate industry has been below 2% from 2019 to 2021. , were 1.67%, 1.31% and 1.85%, respectively.
　　China Construction Bank's attitude towards the real estate industry has also changed. In 2019, China Construction Bank said that it will focus on supporting high-quality real estate customers and ordinary commercial housing projects. In 2020, China Construction Bank stated that it will strictly implement differentiated housing credit policies. In 2021, the company will implement multi-dimensional stress tests, actively analyze the real estate market, and actively respond to risks such as real estate and hidden local government debt.


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[sharon sanders]

China Evergrande: The preliminary restructuring plan is expected to be announced before the end of July, and the release time of the annual report has not been determined


June 21, 2022 07:10
　　On the evening of June 20, China Evergrande (03333.HK), Evergrande Property (06666.HK), and Evergrande Automobile (00708.HK) issued resumption guidance announcements.
　　China Evergrande said in the announcement that the company received the resumption guidance issued by the Stock Exchange on June 15, requiring it to publish all unannounced financial results required by the listing rules and resolve any matters with audit qualifications. In addition, an independent investigation was conducted on the 13.4 billion yuan pledge guarantee of the company's subsidiary, Evergrande Property, which was enforced by relevant banks, and the investigation results were announced and appropriate remedial measures were taken.
　　In addition, China Evergrande said that the company is actively promoting the restructuring and is expected to announce a preliminary restructuring plan by the end of July. The independent investigation of the pledge guarantee of Evergrande Property is under active progress, and the expected time for the completion of the independent investigation has not yet been determined at this stage. The audit work of Evergrande Group is being carried out in an orderly manner. Due to the impact of the epidemic and the independent investigation of Evergrande's property pledge guarantee, the company has not yet determined the release time of its 2021 annual results. Trading in the company's shares will remain suspended until further notice.
　　The three Evergrande companies mentioned in the announcement of the resumption guidance that according to the listing rules, the Stock Exchange will delist any stocks that have been suspended for 18 consecutive months. For the company, the 18-month period will be on September 30, 2023. (China Evergrande and Evergrande Properties expire on September 20, 2023), if the company is unable to satisfy the Exchange to resolve the matter that caused the company to suspend trading, meet all the requirements of the resumption guidelines and fully comply with the listing rules, As well as the resumption of stock trading on or before September 30, 2023 (September 20, 2023), the Listing Department of the Stock Exchange will advise the Listing Committee to start the process of delisting the company.
　　Evergrande Motor has previously announced that the company aims to achieve "Hengchi 5" mass production on June 22, 2022.
　　On March 22, Evergrande New Energy Automobile Group held a mobilization meeting to "achieve the mass production of Hengchi 5 in three months". At the meeting, Xu Jiayin, chairman of the board of directors of Evergrande Group, put forward a request: "The automobile group must fight day and night, work hard Work hard, work hard for 3 months, and achieve mass production of Hengchi 5 on June 22, laying a solid foundation for the healthy and sustainable development of Evergrande."
　　Sean, executive director of China Evergrande Group, mentioned in the investor conference call held on the evening of March 22 that in terms of restructuring plans, the financial situation is being comprehensively evaluated and various potential plans are being discussed. Sean said at the time that he would Propose a debt restructuring plan before the end of July this year, and do the following work with the intermediary team to further strengthen communication with creditors. With the support and cooperation of the intermediary team, when the conditions are ripe, according to the progress of the relevant work, to the overseas creditors and institutions that have signed a confidentiality agreement Provide real-time progress of some debt restructuring, conduct substantive communication and exchanges with creditors, and actively promote the resumption of trading. Liang Linlin, a non-executive director of China Evergrande, said at the meeting that Evergrande adopted the “equity transfer + custody operation” model for the purpose of maintaining the normal operation of Evergrande, promoting the resumption of work and production of existing projects, and protecting the legitimate rights and interests of creditors and home buyers. Cooperated with some trust companies.

zhttps://finance.sina.com.cn/roll/2022-06-21/doc-imizmscu7885874.shtml

[Emily]

I suppose these failures will strengthen the CCP's position. The war economy is doing well there. They are buying so much oil from Russia that Russia has increased output. The west is falling into a trap by sanctioning Russian energy.

[Shiloh]

Source: https://www.bbc.com/news/world-asia-china-62402961

China property crisis: Why homeowners stopped paying their mortgages
By Suranjana Tewari
Asia Business Correspondent
12 hours ago

"Construction stops, mortgage stops. Deliver homes and get repaid!"

That was one of the chants disgruntled apartment buyers in China used at a protest in June. But their ire over unfinished homes didn't stop at signs and chants.

Hundreds of them stopped paying their mortgages - a radical step for China, where dissent is not tolerated.

A young couple who moved to Zhengzhou in central China told the BBC that after receiving the down payment last year, the developer withdrew from the project and construction stalled.

"I have imagined countless times the joy of living in a new home, but now it all feels ridiculous," the woman, who did not wish to be named, said.

A woman in her late 20s who also bought a home in Zhengzhou told the BBC that she too is ready to stop paying her mortgage: "After the project is fully resumed, I'll continue paying."

Many of them can pay but are choosing not to, unlike the US subprime mortgage crisis in 2007 when money was lent to high-risk borrowers who then defaulted.

They have purchased homes in roughly 320 projects around the country, according to a crowd-sourced estimate on Github where homeowners have been posting about their decision. But it's unclear how many actually stopped paying.

The boycotted loans could total $145bn (£120bn), S&P Global ratings estimates. Other analysts say it could be even higher.

The revolt has rattled authorities, focusing attention on a market already under pressure from a slowing economy and a serious cash crunch.

More alarmingly, it has signalled a lack of confidence in one of the main pillars of the world's second largest economy...

[sharon sanders]

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