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4 Sep 2015
China banks to face further profitability and capitalization pressures – Fitch warns
FXStreet (Mumbai) - The Chinese economic slowdown will weaken the asset quality of the country's banks and suppress their revenue growth, ratings agency Fitch said in its recent report.
Key findings of the report:
"The effects on lending rates of the five rounds of interest-rate cuts since November 2014 are expected to continue to filter through over the coming months."
"The slowing economy, which is contributing to greater bank scrutiny in credit decisions, regulatory restrictions on lending to certain sectors, and the local government debt swap programme, will continue to contribute to an absence of strong broad-based loan demand that will limit banks' ability to widen NIMs,"
"The authorities have cut rates, reduced reserve requirement ratios (RRRs), and removed the 75% statutory limit on loan/deposit ratios in part to help boost economic growth. The reserve ratio requirement (RRR) cuts in particular could help limit NIM contraction, and there is room for further cuts with the RRR only 3.5pp from the peak."
Key findings of the report:
"The effects on lending rates of the five rounds of interest-rate cuts since November 2014 are expected to continue to filter through over the coming months."
"The slowing economy, which is contributing to greater bank scrutiny in credit decisions, regulatory restrictions on lending to certain sectors, and the local government debt swap programme, will continue to contribute to an absence of strong broad-based loan demand that will limit banks' ability to widen NIMs,"
"The authorities have cut rates, reduced reserve requirement ratios (RRRs), and removed the 75% statutory limit on loan/deposit ratios in part to help boost economic growth. The reserve ratio requirement (RRR) cuts in particular could help limit NIM contraction, and there is room for further cuts with the RRR only 3.5pp from the peak."