Test shows BoCom able to bear 50% fall in home prices
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The Bank of Communications said Wednesday it is able to bear a 50 percent drop in home prices as it quoted a latest stress test to back up its claim.
The Shanghai-based bank's retail bad loan ratio will increase by 1.2 percentage points if housing prices tumble by 50 percent, said Qian Wenhui, its executive vice president.
Its corporate banking non-performing loan ratio will rise by 1.6 percentage points under the circumstance, he said.
China's banking regulator asked banks to conduct a new round of stress tests in August taking into account the worst scenario of a 50 percent tumble in home prices.
"BoCom's real estate loan risks are under control in general," Qian said at a briefing for the bank's interim report yesterday in Shanghai.
He didn't give the bad loan ratio for the two segments. However, the bank said yesterday that its total bad loan ratio dipped 0.14 percentage point to 1.22 percent at the end of June.
Meanwhile, the China Banking Regulatory Commission has ordered lenders to move their off-balance sheet loans onto their books to strengthen risk control and plug a loophole that banks have used to sidestep liquidity curbs.
Assets related to wealth management products managed by trust companies must be transferred to banks' balance sheets by the end of 2011.
A maximum 17.3 billion yuan (US$2.55 billion) is expected to be moved to BoCom's book according to the regulatory requirement, Niu Ximing, president of the bank, said yesterday. This may see BoCom's capital adequacy ratio dropping 0.1 percentage point following the regulator's call, Niu said. Its CAR was 12.17 percent at the end of June, above the regulatory minimum of 11.5 percent for large state-owned banks.
The mainland's fifth-biggest bank said yesterday its net profit rose 30 percent to 20.4 billion yuan in the first half of this year.
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