Exclusive: Evergrande China lenders weigh in on bad credit and rollover credit – source

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Security guards stand guard outside Evergrande headquarters in Shenzhen, Guangdong province, China, on September 17, 2021. Reuters / David Carton

September 17, 2021

BEIJING/HONGKONG (Reuters) – One of the major lenders to China’s Evergrande Group is preparing for some losses on loans to embarrassed real estate developers, while some creditors have more time to repay, four bank officials told Reuters. that they plan to make a call.

The first reported Chinese banking action shows how financial institutions in the world’s second-largest economy are preparing for the prospect of the collapse of the Evergrande Group.

The developers embody China’s bohemian lending and construction era, with nearly $305 billion in debt, including loans, bonds, so-called trust products and money to pay contractors and suppliers.

Agricultural Bank of China (EggBank) is the country’s third-largest lender by assets and one of the officials said it had made some allowance for doubtful accounts without disclosing details of some of Evergrande’s exposures. said.

Meanwhile, two other major Evergrande lenders, China Minsheng Banking Corp and China CITIC Bank Corp Ltd, are set to advance some of their short-term loans, according to two separate sources who know their respective circumstances. ..

AgBank, Minsheng, CITIC and Evergrande did not immediately respond to requests for comment sent by email.

In general, Chinese banks’ exposure to the Evergrande Group has declined over the past year, according to four sources, with most of their loan balances secured or guaranteed by deposits.

Not all sources were named because they are not allowed to discuss individual clients.

For example, Minasse has reduced its lending exposure to Evergrande from 40 billion yuan to 30 billion yuan over the past 12 months, a source said, and new to Evergrande in recent months. He said that he has stopped giving loans.

Last year, Evergrande reported total banking and other borrowings of RMB 693.4 billion ($107.4 billion). This included loans from trust companies rather than banks, with analysts at 782.3 billion yuan in 2019.

Despite shrinking, the Evergrande Group’s collapse, even managed, would still resonate with the Chinese economy as a whole, given debt as high as 2% of the country’s GDP.

The company’s bank exposure was extensive, and the leaked 2020 document was dismissed as forgery by Evergrande, but was taken seriously by analysts, showing loans spread across more than 128 banks and 121 non-bank institutions. were shown. ..

According to State Bank sources, following the leaked document, the central bank, the People’s Bank of China (PBOC), conducted a credit risk review for all major evergreen lenders and monthly reports of related financial risks. Based on request for evaluation.

The PBOC and the sector regulator, the Bank of China Insurance Regulatory Commission (CBIRC), did not immediately respond to a Reuters request for comment.

systematic collapse

Evergrande will pay $83.5 million in interest on September 23 for the offshore bond in March 2022. For the March 2024 note, an additional $47.5 million will be paid on September 29.

If Evergrande does not pay interest within 30 days, the bond will default.

A major trust creditor said regulators have shown no indication to Chinese lenders about the possibility of an Evergrande bailout.

The editor-in-chief of the Chinese Communist Party-backed tabloid Friday’s Global Times warned Evergrande that he should not bet on a government bailout on the grounds that he is “too big to fail.”

Chinese regulators have reiterated the need to curb unlimited lending by domestic banks to real estate companies and curb speculation on real estate, stressing the importance of de-leveraging in the real estate sector.

The government could intervene to manage Evergrande’s systematic collapse, according to two bankers familiar with the matter.

“And regulators have conducted relevant risk assessments among financial institutions before doing so,” one of them said.

($1 = 6.4550 Chinese RMB)

(Reporting by Cheng Leng in Beijing, Julie Zhu in Hong Kong, Claire Jim, Editing by Sumeet Chatterjee and Mark Potter)

Exclusive: Evergrande China lenders weigh in on bad credit and rollover credit – source

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