[ET Net News Agency, 7 March 2018] Credit Suisse said the CBRC has allowed its local
branches to apply NPL provision coverage of 120%-150% (versus minimun 150%) and a
loan-loss-reserve-to-loan ratio of 1.5%-2.5% (versus minimun 2.5%).
While the market may read it as a signal to boost loan growth, the research house
suspects it is aimed at helping some banks facing capital pressure as the non-standard
credit assets (NSCAs) from on- and off-B/S shadow banking come on to the loan book.
Four Joint Stock Banks (JSBs) in particular (CEB, Minsheng, Citic and Ping An Bank) have
bigger exposure to NSCAs (non-standard credit assets) while their capital level is close
to the regulatory requirement.
Credit Suisse's sensitivity analysis suggests these banks may need to replenish capital
if a certain portion of those NSCAs come onto the loan book.
The research house said this is a relief to JSBs facing capital pressure, and it would
sell the rally as their profitability would be structurally affected on margins (inferior
NIM on loans vis-a-vis NSCAs), fee income (less WMPs) and diminished capacity to grow
loans. (KL)