Slower banking assets & credit growth, less shadow, but better transparency。
Adjusted credit growth at 15% yoy in Sept, the same as in Aug
Credit growth rebounded in July but we expect deleveraging to carry on
Last Friday the regulators released loan & TSF data and balance sheet detailsof all banks in China. We note the financial deleveraging campaign hascontinued to make progresses: banking assets growth softened further; loanand TSF beat estimates but the overall credit growth actually moderated;
PBOC reported Sept new loans of Rmb1.27tr and TSF of Rmb1.82tr, bothahead of consensus. But, if adding new municipal bonds of Rmb356bn, theadjusted system credit growth would be 15.0% yoy, same as the prior month.In detail, noticeably China households are levering up quickly. We welcome thepersonal loans driven by genuine consumption growth, but there may be anotable portion of short-term consumer loans that were used to financeproperty purchases, which in our view contains higher risks. Regulatorycrackdown on property-related consumer loans together with monetary policystaying neutral lead us to expect slower credit growth in 4Q17.
The PBOC reported July 2017 new loans of Rmb826bn and new TSF of Rmb1.22trn, both exceeding consensus estimates. Adding back strong municipal bond issuance of Rmb845bn, system credit growth rebounded to 15.4% yoy from 14.7% in June (Fig. 1). We attribute the stronger-than-expected credit data to 1) banks bringing off-B/S shadow credit into on-B/S, and 2) accelerating bond financing on lower rates. Given the still healthy macro data, we expect the financial deleveraging campaign to continue in order to delever financial markets and contain the asset bubble. Thus we maintain our forecast that system credit will fall to 13%-14% yoy by end-2017.
冠亚体育网站， shadow banking size was shrinking while loan growth stayed resilient. As suchfrom the financial system’s perspective we see improving transparency andlower liquidity risks. While the deleveraging has contributed to a modestlyslower economy, the growth momentum is in line with our house view. We donot foresee policies to ease and we expect the deleveraging to carry on orderly.。
Who is borrowing? Household to lever up quickly
All borrowers levered up; weaker lenders slowed down
Softened banking asset growth, driven by smaller banks and shadow banking。
A breakdown by borrower suggests household and corporate sectorscontinued to lever up, making up 31%/41% of new system credit in Sept(35%/38% in Aug). For households, while mortgage growth had slowed, s/tretail loan growth accelerated to 17.6% yoy in Sept (vs. 15.8% in Aug or 7.3%in 1Q17) to make up c.10% of credit creation. We attribute this to both decentconsumption growth with rising credit penetration and property-relatedlending. As highlighted in our report Where did consumer loans go?, weestimate 1/3of new consumption loans may be used to finance purchases ofsecond homes. However, PBOC and local CBRC offices have started to crackdown on property-related consumer loans in September and we expectconsumer loan growth momentum to moderate in the coming months.
Borrowing by the corporate, household and government sectors were all strong in July, which made up 23%, 25% and 50% respectively of new system credit in July (Fig. 2) versus 50%/28%/19% in 1H17. Corporate medium-to-long-term loan growth rose further to 16.5% yoy in July (vs. 15.8% in June). Mortgage growth slowed to 27.6%, which was offset by accelerating short-term retail loans (15.3% in July vs. 7.3% in 2016). In terms of lender mix, China’s domestic banking assets grew by 11.4% yoy as of June 2017 versus 16.5% in 2016, dragged down by the slower growth of smaller banks. Total asset growth of joint-stock and city/rural banks (45% of total banking assets) decelerated notably to 12% yoy in June from 19% in 2016 (Fig. 3). Particularly, JSBs’ asset growth declined to 8.4% from 17.2% in 2016. In contrast, the Big Five banks (36% of total banking assets) expanded their asset base modestly faster at 8.8% yoy vs. 6.9% in 1H16.
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