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RTNominal unchange3.200 0.000 (0.000%)

27/09/2019 17:49

{I-bank focus}MOF's new policy positive for banks - Goldman

[ET Net News Agency, 27 September 2019] The Ministry of Finance (MOF) released a
consultation paper, which includes a new provision policy requiring China banks to bring
their NPL (non-performing loan) coverage ratios to below 300% (2x the regulatory
requirement of 150%) and banks with NPL coverage ratios above 300% to return the reserves
beyond that amount to shareholders.
Goldman Sachs believes such a policy would be positive for banks with high-risk buffers
and clean balance sheets because the additional profits released could (1) boost CET-1,
(2) be paid out as dividends, or (3) aid NPL disposal.
These options could benefit banks with extra provisions, potentially leading to stock
outperformance, the research house added.
Goldman expects China Merchants Bank (03968), Bank of Nanjing (Shanghai: 601009), Bank
of Ningbo (Shenzhen: 002142) and Postal Savings Bank of China (01658), which have >300%
NPL coverage ratios, to be the key beneficiaries of such a policy given their potential
for profit release and healthy balance sheets. (KL)

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