Banks expected to miss lending target
Banks have also taken a conservative approach to avoid defaults amid the concerns over growing bad loans due to the slowdown of economic growth, said Nie Riming, a senior researcher from the Shanghai Institute of Finance and Law.
New yuan-denominated bank loans are expected to reach 800 billion yuan ($126.54 billion) in March, falling short of the central government's first quarter target of 2.4 trillion yuan, China Securities Journal reported Monday.
The situation shows the banks' reluctance to lend, which could encourage Chinese companies to obtain more funding through other means, such as issuing stocks and bonds, analysts said.
If expectations are correct, new bank lending this month wouldn't be enough to make up for the below-target lending totals of January and February, which were 738.1 billion yuan and 710.7 billion yuan, respectively, according to the People's Bank of China (PBC).
As it has become increasingly difficult to obtain deposits, Chinese banks have been reluctant to lend to ensure they can meet the required loan-to-deposit ratio, said Sheng Hongqing, a senior analyst from China Everbright Bank.
In recent months, some Chinese banks have struggled to keep their loan-to-deposit ratios below the maximum of 75 percent, Sheng told the Global Times.
Banks have also taken a conservative approach to avoid defaults amid the concerns over growing bad loans due to the slowdown of economic growth, said Nie Riming, a senior researcher from the Shanghai Institute of Finance and Law.
The drop in new bank loans won't necessarily intensify the financing difficulties of poorly-funded enterprises, but will encourage them to turn to direct financing, such as issuing stocks or bonds, Sheng said.
Non-financial enterprises rely heavily on bank lending. Last month, these companies issued 154.4 billion yuan in corporate bonds and 22.9 billion yuan in equity - nowhere near the 710.7 billion yuan in new bank lending for the month, the PBC reported.
The PBC has recently taken a series of measures to boost liquidity in the banking system, which Sheng said demonstrates government efforts to encourage enterprises to raise money directly from investors rather than relying on bank loans.
The PBC has refrained from draining money from the banking system with central bank bills over the last 11 weeks, even as a large volume of money is set to flow back into the market. That has pushed down money market rates, which have lowered the interest rates in the bond market, Sheng said.
Global Times | By Wang Fei’er | 2012-3-19
