MNI BRIEF: China May Inject CNY1 Trln To Replenish Big Banks
MNI (BEIJING) - China will likely issue CNY1.05 trillion of special treasury bonds to replenish big state-owned banks, which is expected to increase an average one percentage point of their core Tier one capital adequacy ratio and create about CNY15 trillion of headroom for asset expansion, according to a report released by Research Institute of Bank of China on Thursday.
The move will address pressures on core Tier 1 capital for large banks over the next five years, the report said, predicting net interest margin will decline to 1.5% in 2025 due to continued reduction of PBOC policy rates, the effects of financial support to the real estate sector and requirements to lower debt costs for local governments. (see:MNI: Beijing's Bank Capitalisations To Lift Tier-1, Lending)
However, banks’ interest income is expected to grow by 7% y/y next year compared to a decline of 3% in the first three quarters in 2024, thanks to further reserve requirement ratio cuts, expansion of loans and financial investments as well as the reduction of deposit rates, the report noted, saying asset growth could reach 10% y/y from 2024’s8%.The rising risk of non-performing personal loans warrants attention since the weak economic recovery has impacted residents' income and repayment capacity, the report said.