China’s Bank of Communications warns of property market risks

By Thomson Reuters Aug 26, 2022 | 7:16 AM

By Ziyi Tang and Engen Tham

BEIJING/SHANGHAI (Reuters) -China’s Bank of Communications (BoCom) on Friday warned of liquidity risks in the property sector after it posted an almost 5% rise in first half net profit. “Asset quality control in the second half of the year still faces fairly large challenges and pressures, such as the liquidity problems seen in the real estate industry,” said Chief Risk Officer Lin Hua in a press conference, adding that risk could spread to other industries. Lin also expects the quality of retail credit assets to fluctuate in the second half with the risk on credit card debt fairly high. The results come after a gloomy first half in which rising developer defaults dampened the property market as COVID shut-downs in some cities brought business to a halt.

But despite this, Vice President Zhou Wanfu said housing projects that were delayed only accounted for 1.55% of the bank’s mortgage loan book at the end of July, or 23.6 billion yuan ($3.44 billion) of outstanding mortgages. Overdue loans accounted for just 0.03% of total mortgage lending. The lender reported a 1.46% non-performing loan ratio at the end of the second quarter compared to 1.47% at the end of the previous one. “Since the beginning of this year, under the context of changes unseen in a century intertwined with unprecedented pandemic outbreak, the complexity, severity and uncertainty encountered by the country’s economic environment have increased with more risks and challenges,” BoCom said in a statement to the Hong Kong stock exchange. BoCom reported a 4.8% rise in first-half net profit despite what it referred to as the unprecedented coronavirus pandemic. Profit rose to 44.04 billion yuan for the January to June period from 42.02 billion yuan a year earlier, the bank said in its statement. Net interest margin (NIM) – a key indicator of profitability – was 1.53% at the end of June compared with 1.56% at the end of March, though vice president Guo Mang warned that commercial lenders face downward pressure on their NIM.

($1 = 6.8627 Chinese yuan renminbi)

(Reporting by Engen Tham and Ziyi TangEditing by David Goodman, Kirsten Donovan)