China Banks

[Dosser]

Will there be more pain to come before recovery ? 

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Two Chinese local banks enter bankruptcy procedures (27 Aug 2022)
https://asia.nikkei.com/Business/Markets...procedures

China Minsheng Bank Interim Results
https://staticpacific.blob.core.windows....2709_0.PDF
"
Conditions of the industry
In the first half of 2022, China’s economic operation remained stable on the whole, but the operating environment became more complicated and severe. Due to the combined influences of tightened monetary policies in the developed economies, geopolitical conflicts and resurgences of the pandemic, the global economy struggled with high inflation and low growth. China’s economic development was confronted with pressures of shrinking demands, supply shock and weakening expectation. Since the second quarter, due to the sporadic outbreaks of the pandemic, market entities have faced more notable difficulties. In particular, medium, small and micro enterprises, some sectors and groups suffered relatively severer impact. New challenges were posed against stabilising growth, employment and price. Since June, as the pandemic prevention and control improved, a basket of policies to stabilise growth have been implemented, and the construction of major projects has been accelerated nationwide. China’s economy has shown signs of recovery, and the fundamentals of long-term positive growth remained unchanged...."

Yes, lots more pain. The drop in the real estate market and the knock-on effect on the construction sector and the banking system have to play out. Just the price to pay for 40 years of go-go growth. The geopolitical issues, reducing external demand and pandemic lockdowns are only amplifying a cyclical downturn that had to happen sooner or later.

[dreamybear]

There is no lack of local "finfluencers" talking about REITs. But perhaps China big banks can be an alternate dividend yield play, particularly for investors who are confident about China's economy and its economic prospects. Despite the recent years' of lockdown which had hit China's economy very hard, the Big banks seem to be "dividend resilient", for e.g. higher dividends were declared for the 2 banks below.

DODD.

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ICBC Dividend Trend
http://www.aastocks.com/en/stocks/analys...mbol=01398

BOC Dividend Trend
http://www.aastocks.com/en/stocks/analys...ymbol=3988

China's Big Five banks post healthy results, warn of shaky recovery
https://www.reuters.com/business/finance...023-03-30/

[Big Toe]

I held RMB cash in several accounts in China. For business use so I can react much faster to special situations.
The peak business opportunities was during the covid period and I had significant amounts that were converted at between 4.6X-4.7X to 1 SGD.

Fast forward to today, a large % was not used, it is now 5.3 to 1 SGD. Just by sitting around with RMB, I lost ard 11+% and that excludes conversion fee loss. And one account was frozen for many months due 'investigation", which is complete B.S. PRC can and will investigate and freeze all bank account they deem "suspicious". It was cleared after they found all my monies was legitimate. It happens more often than you think and not the first time it happened to me. The lack of transparency can be shocking to people new to the system. Given a choice, I want nothing to do with china banks located within china. But more often than not, there isnt a choice. To be fair it is not the bank's fault, it is just the environment which they operate in, they had to comply with regulators/police etc.

Msian banks do offer higher dividends as well, but as with China Banks, completely pointless if SGD is likely stengthen.

[dreamybear]

Welcoming news for OPMIs, especially considering the time frame, e.g. 18 years in the waiting for Bank of China. Not sure whether the interim dividends form part of the final dividends based on past years' track record but a higher div payout ratio or special dividend wld be more than welcome.  

This move does offer more flexibility for OPMIs who need to convert foreign currencies to local SGD, since previously, have to wait a year for the dividends, and then "time" the appropriate exchange rate.

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https://www.reuters.com/world/china/chin...024-08-30/
"Still, all five lenders announced interim dividends for the first time in more than a decade, in line with state-owned enterprises after the securities regulator last year called for a boost to investor returns as stock markets fluctuated."

BOC makes first interim payout in 18 years
https://www.thestandard.com.hk/section-n...n-18-years

[weijian]

From ChatGPT, I was told that China banks made a total net profit of ~2.4trillion yuan in 2023. So the regulation-induced mortgage rates' decrease will result in 300bil/2.4trillion ~12.5% drop in profits on aggregate, and it is quite substantial. If we were to couple with a NPL increase as a result of the worsening economy, that would be a big whammy.

China weighs cutting mortgage rates in two steps to shield banks

“In essence, it’s a transfer of wealth from banks to households, so positive for consumption,” Larry Hu, head of China economics at Macquarie Group, wrote in an Aug 31 note. If all existing mortgages are to be refinanced, borrowers can save about 300 billion yuan (S$55 billion) in interest payments annually, equivalent to 0.6 per cent of the nation’s retail sales or 0.2 per cent of its gross domestic product, he estimated.

https://www.businesstimes.com.sg/propert...ield-banks