|Bid||0.4460 x 121700|
|Ask||0.4940 x 110800|
|Day's range||0.4700 - 0.4700|
|52-week range||0.4240 - 0.6900|
|Beta (5Y monthly)||0.37|
|PE ratio (TTM)||2.63|
|Forward dividend & yield||0.04 (9.75%)|
|Ex-dividend date||02 Jul 2020|
|1y target est||N/A|
(Bloomberg) -- Several of China Evergrande Group’s largest lenders are reducing their exposure to the debt-laden developer, underscoring persistent concerns about the company’s financial strength despite its recent deal with investors to avert a cash crunch.China Minsheng Banking Corp., Evergrande’s biggest creditor, told branches to avoid new unsecured loans to the developer and reduce overall financing, including through the bond market, people familiar with the matter said, asking not to be identified discussing private information. The move comes amid increased scrutiny from regulators, who have urged Minsheng Bank to improve management of its Evergrande risks after some of the bank’s short-term loans lacked sufficient collateral, one of the people said.At least three other major creditors -- including Agricultural Bank of China Ltd., China Zheshang Bank Co. and Industrial & Commercial Bank of China Ltd. -- have adopted similar policies that were in effect after Evergrande reached a deal with investors two weeks ago to avert $13 billion of repayments. Large state-owned lenders will only consider new financing for the developer if it’s linked to specific projects with ample collateral and risks that are segregated from Evergrande as a group, the people said.Representatives at Minsheng Bank, AgBank, Zheshang Bank and ICBC said they couldn’t immediately comment.Evergrande’s cooperation with financial institutions is normal and the company isn’t aware of banks cutting exposure, a representative said in a text reply to questions from Bloomberg. Evergrande isn’t aware of Minsheng Bank holding any of its bonds, the representative said.Prices for Evergrande’s dollar notes dipped after Bloomberg’s report on Monday, with the company’s bond due 2025 falling 0.6 cent on the dollar to 77.1 cents. Shares dropped 1.3% in Hong Kong even as the benchmark Hang Seng Index gained 2.2%.The world’s most indebted developer has become a major focus for international investors and Chinese regulators after last month’s liquidity scare. While Evergrande’s shares and bonds have rebounded from their lows, a more restrictive stance from China’s lenders could increase pressure on the developer as it tries to revive investor confidence. One of the company’s units is planning to sell about 2 billion yuan ($300 million) of five-year bonds this week, according to people familiar with the matter.Read more: Evergrande Plans Return to Bond Market With 2 Billion Yuan DealThe challenge for Evergrande’s billionaire founder, Hui Ka Yan, is to raise cash without resorting to a fire sale. The developer slashed apartment prices by as much as a third during China’s Golden Week holiday this month and is seeking to list its electric-vehicle and property-management units as part of a longstanding pledge to reduce leverage. It’s also sitting on one of the country’s largest portfolios of undeveloped land.Evergrande has financed its sprawling business with a complex web of liabilities that includes $88 billion owed to banks, shadow lenders and individual investors across the country. The developer has also borrowed $35 billion from bondholders around the world and received down payments on yet-to-be-completed properties from more than 2 million homebuyers.Trust companies, among the most important non-bank lenders to Evergrande, are also turning more cautious. One Zhejiang-based trust firm has imposed a new cap on loans to the developer and won’t roll over all its existing loans when they come due, one person said, adding that any new lending will require higher interest rates and depend on the quality of the underlying project.Another trust firm decided not to work with Evergrande on any new products and will instead focus on ensuring existing products are repaid on time, one person said.Evergrande has long been a subject of creditor angst, but worries about the developer surged to the fore last month after it sent a letter to provincial authorities warning of a looming cash crunch -- news of which dragged down its shares and bonds. The letter listed Minsheng Bank, AgBank, Zheshang Bank and ICBC as the developer’s biggest creditors. Minsheng Bank has more than 29 billion yuan of exposure to Evergrande, a person familiar with the matter said late last month.While Evergrande has dismissed the concerns as based on rumors and “fabricated” documents, worries about its financial health were big enough that the Chinese cabinet and its financial stability committee, chaired by Vice Premier Liu He, discussed the risks posed by the developer last month.Evergrande sealed a deal on Sept. 29 with a group of investors that waived their right to force repayments that had been tied to the company’s plan to gain a listing in China. But with at least $5.8 billion of bonds maturing in the next two months, analysts have said Evergrande still needs to drastically pare debt and sell assets or risk lurching back into another credit scare.(Updates with Evergrande comment and markets from fifth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- China needs banks to open the credit taps to get the economy back on its feet after the sudden stop caused by the coronavirus outbreak. The trouble is that they’re in far worse shape than in 2008, when a government-mandated lending boom helped revive growth. That’s why a cut in the deposit rate is long overdue.The People’s Bank of China is in discussions to lower the interest rate banks pay on deposits for the first time since 2015 and a decision could be announced within days, the Financial Times reported last week, citing people familiar with the deliberations. A reduction would shore up banks’ profitability, buying lenders breathing room as authorities lean on them to support companies that are struggling to stay afloat after a shutdown that affected two-thirds of the economy.It can’t come a moment too soon. The government is pushing banks to extend relief by rolling over debts, lowering loan rates and keeping credit lines open. It has allowed them to refrain from collecting interest from virus-affected companies until June 30 and has loosened the criteria for classifying loans as nonperforming. To encourage lending, regulators have also reduced the percentage of deposits that lenders must lodge with the central bank, known as the required reserve ratio.All these measures will increase pressure on a state-controlled banking system that is already undercapitalized and having its net interest margins squeezed. What will really help is a reduction in banks’ funding costs. While the rate on demand deposits is a puny 0.35%, the amount paid on time deposits is far higher — as much as 1.5% on sums locked up for one year.On Monday, the PBOC reduced the interest rate that it charges on loans to commercial banks by the most in five years. The seven-day reverse repurchase rate was cut to 2.2% from 2.4%. While that lowers funding costs, it also signals an impending reduction in lending rates. Analysts say a cut in the central bank’s medium-term lending facility rate, its main policy tool, isn’t far away. That in turn will influence the loan prime rate, set by 18 banks once a month.Smaller banks — outside the big four of Industrial & Commercial Bank of China Ltd., Bank of China Ltd., China Construction Bank Corp. and Agricultural Bank of China Ltd. — will be the biggest beneficiaries of lower rates for time deposits. These account for a large portion of customer accounts at lenders such as Bank of Communications Co. and Ping An Bank Co., according to to CGS-CIMB Securities Ltd. analyst Michael Chang. Such banks have more small and medium-size enterprises among their loan clients and also lend out more of their deposits.Even the big four could do with some relief. While they’re better capitalized and more profitable than the rest, they bear the burden of being the government’s principal policy tool, requiring them to hand out low-interest loans and help out struggling smaller banks.The bigger question is how much difference even lower deposit rates will make given the scale of the challenge the economy faces. A prolonged health emergency will cause the nonperforming loan ratio to triple to 6.3%, S&P Global Inc. estimates.In 2008, China’s banks were still flush from recapitalizations and initial public offerings conducted earlier in the decade, and their shares were trading above book value. Now, most are at discounts: Bank of China’s Hong Kong-listed stock trades at a price-to-book ratio of less than half. At the same time, the financial system has ballooned in size and leverage has soared. The ratio of debt to gross domestic product jumped to 276% at the end of 2018 from 162% at the end of 2008, according to Bloomberg Economics.China’s banks “make just enough in profits to keep pace with growth and keep capital ratios stable so they can’t afford to do a lot more than they’re doing now,” said Grace Wu, Fitch Ratings head of Greater China bank ratings.Regulators could relax capital ratios at mid-size lenders such as China Minsheng Banking Corp. and China Guangfa Bank Co. Still, that would risk storing up bigger problems down the road. Consumer defaults are already piling up, with overdue credit-card debt swelling last month to 50% from a year earlier. Qudian Inc., a Beijing-based online lender, said its delinquency ratio jumped to 20% in February from 13% at the end of last year.Cutting deposit rates also punishes consumers, the very people the government needs to help get the economy back up and running. Lower rates could also compound banks’ challenges by encouraging depositors to pull out money, though a crackdown on shadow banking has reduced the range of alternatives.There are no easy answers. Whatever their limitations or unwanted side effects, the need to keep banks in some semblance of health suggests lower deposit rates are coming soon. This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.