Profits Soar, But Chinese Banks Face Massive Capital Shortfall
Posted Apr 29, 2010 08:23am EDT by Joe Weisenthal
Related: FXI, PGL, CIND.PK, EEM, XLF, EPP, FAZ
From The Business Insider, April 29, 2010
A massive lending binge over the past couple of years has left major Chinese banks undercapitalized according to a new report from Caing, which has gone through the latest financial reports.
Sure, profits are surging, but the bottom line is that these banks are likely to need 200-300 billion yuan (up to $45 billion est.) in 2010 in fresh capital. To put that into perspective, that's half as much as all the money raised by mainland Chinese public companies last year.
Specifically:
Industrial Bank's capital adequacy ratio slipped to 10.63 percent at the end of the first quarter of this year from 10.75 percent at the end of 2009, with its core capital level dimming from 7.91 percent to 7.59 percent. The minimum capital requirement for joint-stock banks was raised to 10 percent by China Banking Regulatory Commission late last year. For six largest banks, it is 11 percent.
China Citic Bank's capital adequacy dropped to 9.34 percent at the end of March, down 0.8 percentage point from the end of last year. The Bank of Ningbao had mixed performance: its core capital level dip from 9.58 percent at the end of last year to 9.07 percent at the end of the first quarter while capital adequacy ratio climbed from 10.75 percent to 10.88 percent during the time frame.
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