"The bank assets will deteriorate"
July 15, 2010
LE FIGARO. – Almost all the Chinese banks have announced their intention to raise capital on the markets in the weeks to come, what are their needs?
Yi Zhang. – The situation of the Agricultural Bank of China is a little different from that of other banks, since it is an IPO. Others seek primarily to increase their capital. After the surge in credit last year, bank reserves have fallen, they now need to re-level. They also want to finance their development, mainly provided on the internal market.
Last year, credit has soared in China. Banks have lent nearly 1000 billion euros. What impact does this have on the quality of their assets?
The level of bad loans remains low.But we arrive at this moment to end the cycle of credit and in two or three years, the loans will be expiring and reimbursements are claimed bad credit pay day loans. Here we see the banks' assets deteriorate. According to our calculations, the cumulative level of bad debts over the next three years could reach up to 5% for the entire Chinese banking system.
In 2009 and again in the first half of this year, some Chinese banks ranked as the most profitable in the world, to renowned institutions like Goldman Sachs. Where do they derive their income?
Interest income on loans are the main source of income for Chinese banks. This should remain so for years.However, the committees (the investment banking, consulting, cash management and clearing services) recorded the biggest gains of around 20%.
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