China’s slower new loan growth reflects credit concerns

HONG KONG - Commercial banks in China loaned RMB708 billion in new yuan loans in April, lower than both the expected RMB903 billion and the RMB1,180 billion in new loans extended in March.

ANZ Bank says the weaker-than-expected loan data suggests that China’s commercial banks remain concerned about credit risks in the real sector.
By Q1 2015, non-performing loans in the biggest five commercial banks doubled the amount registered in Q1 2014. Rising credit risks and provisions could have constrained banks’ balance sheet expansion, ANZ believes.
“Aggregate financing came in at RMB1,050 billion. The share of off-balance sheet financing, including undiscounted bank draft, trust loans and entrust loans, dropped to 7.2% of aggregate financing by the end of April, down from 8.4% as of Q1 end.”
ANZ says M2 growth surprisingly declined to 10.1% y/y in April, the lowest in record, from 11.6% in Q1, despite a large liquidity injection via the 100bps RRR cut.
“The record low M2 growth, together with weaker-than-expected real activity data, have strengthened our call for a further interest rate cut. The likelihood of further RRR cuts has increased as well.” www.live.anz.com (ATI).