[ET Net News Agency, 13 November 2018] The State Council on 9 November stated that it
is aiming to lower the new lending rate for SMEs in 4Q (being 1ppt lower than 1Q levels).
CBIRC chairman Guo Shuqing on 8-November said that the regulator is initially
considering a "one-two-five directive", i.e. for large banks to allocate one-third of
new corporate loans to privately-owned enterprises (POEs), mid/small banks to allocate
two-thirds of new corporate loans to POEs, and to have POE loans accounting for >50% of
new corporate loans in 3 years.
HSBC Global Research believes the initiatives are negative for loan pricing while
neutral for loan volume. It estimated a 1-3bp negative NIM impact over three years upon
lowering SME lending rates; HSBC assumed that 25-50% of POE exposures are SMEs and those
exposures will face a 1% lending rate decline.
While banks may allocate more new loans to POEs, the research house does not expect the
pace of loan growth to pick up materially.
HSBC said the CBIRC's intention to introduce SOE versus POE lending marks a new
dimension of regulatory guidance. As a negative, banks will face difficulty in classifying
SOEs versus POEs, especially for entities with layered and mixed public and private
ownership.
HSBC sees an increased regulatory emphasis on supporting the broader economy and on
improving credit utilisation; these follow the earlier easing of interbank liquidity,
easier-than-expected adoption of WMP rules, and signs of moderating residential mortgage
lending rates. (KL)