Chinese banks’ new loans hit 3-year low in December

Mid-to-long term loans remain in red.

According to Bernstein Research, yesterday morning, the People's Bank of China released new loan and deposit figures for December 2012. Loan growth came in at RMB 454 billion, 17% lower than market expectations and down 13% from November levels.

Bernstein Research also notes, system-wide deposit balances saw strong inflows of RMB 1.58 trillion which resulted in a70bp decline to the banks' loan-and-deposit ratio to 68.7% (off the 5+ year peak level). Reflecting the poor structure of loan growth, mid-to-long term loans declined for the 2nd consecutive month. Despite the weaker loan growth, other financing channels (e.g., corporate bond issuance and trust loans) remained robust in December.

Here’s more:

2012 full-year new loans totaled RMB 8.2 trillion, 10% higher than new loan growth reported in 2011. We expect the banks to report RMB 8.0 trillion of total loan growth for 2013, which would imply a 12.6% annual growth of loans outstanding in China (media reports put the figure at RMB 8.5-9.0 trillion range). 

M2 money supply growth for the month of December was 13.8%, down 10bp from November levels and below the market expectations of 14.0%. In addition, this reflects a 100bp deceleration from the 2012 peak of 14.8% in September.

We continue to maintain our belief that the Chinese banks, as a group, are attractive at current levels. We reiterate our preference for the large banks and our Outperform ratings on CCB, ICBC and BOC. We believe the large banks will outperform the smaller banks on fundamentals when we enter the Q4 2012/Q1 2013 earnings season in March/April.