China banks may need to raise billions of dollars of assets in the next few years. Because, with the massive loan, the local banks became vulnerable to bad credit.
The few banks that has the potential to increase their capital, recorded more than 300 billion yuan (USD44 billion). They are the banks under regulatory pressure to improve its balance sheet.
“Hopefully the credit and balance sheet growth is expanding rapidly in 2009 and 2010. Bank may need to raise new capital to satisfy regulators as the higher capital adequacy ratio standard,” said BNP Paribas analyst Dorris Chen, as quoted by the AFP, Wednesday ( 25/11/2009).
Chen said that the 11 banks listed on Shanghai and Hong Kong may need to raise capital up to 326 billion yuan. China itself has set a number of the bank’s capital adequacy ratio of at least eight percent of them.
Meanwhile, Citigroup analyst Simon Ho said, in his research that the small banks that registered in Shanghai may have to seek up to 113 billion yuan in 2011, which has announced plans to raise loans totaling 53 billion yuan.
“No (banking in Hong Kong are registered) are currently in need of new equity but maybe there is a need like that in two to three years ahead,” added Ho.
Ho added, the banks listed in China has a capital adequacy ratio of between 8.5 percent and 16.1 percent at the end of September. However, some banks had expressed no plans to raise capital immediately.
Banking in China this year government notes will improve the economy in the face of the global financial crisis. The new bank loans reached 7.4 trillion yuan (USD1, 1 trillion), in the first half of this year, is expected to be pumping the economy with the world’s third largest economy to fight global decline.
These measures slowed the regulatory control of the banks loans and improve risk management. While seasonal factors also play a role.
