Recent government cooling measures in the property sector may tamp down the number of individual mortgages this year, but curbs will actually help Agricultural Bank of China's housing loan quality in the long term, the bank said.

The Beijing-based lender's outstanding loans in the property sector, including credit to developers and individual mortgages, now exceed 930 billion yuan, according to its initial public offering prospectus.

At the time of the report, property lending accounted less than one quarter of the ABC's overall loans, which stood at 4.14 trillion yuan.

The small proportion could mean that the bank is well positioned to weather negative impacts from the property sector.

The bank's loans in property sector are mainly concentrated in affluent areas such as the Yangtze River Delta, Pearl River Delta and Bohai Rim Region, and to leading developers.

The central government began in mid-April to tighten loan conditions and increase the supply of land to rein in rapidly rising real estate prices in some cities and avert a possible bubble in the industry.

Under the new government policies, the mortgage loan interest rate discount banks usually offer to the first home buyers will be discouraged.

Banks have also been ordered by the government to raise their interest rates for loans to second homebuyers or beyond.

Such moves will actually lift ABC's interest rate spread and its profit margin.

The stringent requirement for loans extended to developers and individual homebuyers will also help the bank screen out potential high-risk borrowers and improve the quality of loans.

Yet for the property sector itself, there is no sign that the industry will face a slowdown in the long term.

The rapidly rising housing prices in the first-tier cities reflect that a certain degree of bubbles does exist in those places.

But the real estate industry in the second and third-tier cities still has room to grow.

And in terms of the type of property, the high-risk category is the commercial property assets, while ABC's property loans are mainly in the residential housing projects.

According to official figures, the vacancy rate of the commercial property is about 10 percent, a threshold above which it is generally considered to be more risky, while residential housing vacancy rate is only around 3 percent.

The robust demand for property is driven by the population growth and demands for improvement as income grows.

ABC, which had about 24,000 branches and about 320 million customers by the end of 2009, said earlier that it expects 2010 net profit to rise at least 28 percent year-on-year to 82.9 billion yuan.

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