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Bad Debt At China's - And The World's - Largest Bank Surges By Most Ever
A week ago, when showing the following chart of Chinese housing trends...
... we reported that the "burst Chinese housing bubble leads to first annual price decline since 2012", and warned that it is only a matter of time before both China's GDP, extensively reliant on housing construction, as well as Chinese bank assets, primarily consisting of housing-related loans and other fixed income exposure, take a major hit
This happened yesterday, when in an exchange filing China's Industrial & Commercial Bank of China, the biggest bank in both China and the entire world, reported its biggest jump in bad loans since at least 2006.
Specifically, ICBC’s nonperforming loans rose to 115.5 billion yuan in September from 105.7 billion yuan in June. The increase was the biggest since quarterly data became available. Nonperforming credit accounted for 1.06 percent of total advances.
It wasn't just ICBC: as the chart from the WSJ below shows, bad debt rose at every single other major bank in China as well:
According to Bloomberg, nonperforming loans rose 9 percent in the third quarter from the previous three months, the Beijing-based bank said in an exchange filing yesterday. This increase surpassed the rise in net income which gained 7.7 percent from a year earlier to 72.4 billion yuan ($11.8 billion).
The problem for China is two-fold. On one hand as Bloomberg observes, "a struggling Chinese economy is weighing on ICBC’s share price and is poised to drag the company to its weakest full-year profit growth since at least 2001 as more borrowers default."
The second problem is that as ICBC felt first hand (and surely underreported, because this is China after all), the soaring bad debt notionals make it next to impossible for the PBOC to inject even more good debt which would promptly turn into NPLs until it ultimately drowns China leading to the mass defaults which the Politburo has been avoiding for so long.
“ICBC remains under pressure as bad loans in China continue to rise,” Zheng Chunming, a Shanghai-based analyst at Capital Securities Corp., said by phone yesterday. “The operating environment for companies is getting more difficult as China’s economy faces downward pressure.”
Furthermore, as noted above, since ICBC is the world's largest bank by assets, it has operations everywhere. "In its overseas push, ICBC this year acquired a Turkish lender, won approvals for a branch in London and yuan clearing operations in Luxembourg and Cambodia, and obtained a banking license in Myanmar. The lender previously expanded in Argentina, Canada, South Africa, Thailand and Indonesia. Operations outside China accounted for 7.1 percent of company assets as of June, up from 6 percent a year earlier.
ICBC set aside 8.2 billion yuan of provisions against potential soured credit, 30 percent more than a year earlier.
“Provision charges will be the biggest swing factor for banks’ earnings,” said Mu Hua, a Guangzhou-based analyst at GF Securities Co. “The more bad loans they write off, the more additional provisions they need to set aside to maintain the required coverage ratio.”
This means that growth not only China but the rest of the world (but not the US, don't worry: the US will successfully decouple from the rest of the world for the first time in history) grinds to a halt, ICBC's balance sheet is about to become an epic disaster, suggesting that instead of spending money on growth and infrastructure projects, China will spend 2015 and/or longer simply trying to keep its banks stable. Just as, according to conventional wisdon, the Fed prepare to hike rates.
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I blame Tim's Cock. Uuuuhhh. I meant Tim Cook.
"Let them eat cock" [I mean CAKE]
This can be fixed by simply changing a few computer files.
funny coincidence, but I read about this chinese credit crunch in a fortune cookie the other day.
the kung pao was excellent.
BREAKING: Market is fixed. I noticed a down tick.
Ok...so Chinese banks have an uptick in bad loans. How about the Europeans or the Indians?
But I cannot remember where Lehman, Enron and Detroit bankruptcies happened and in which country did Merrill and Bear Stearns disappear and in which country did top investment banks like Goldman and Morgan Stanley turn into socialist zombie Fed controlled banks overnight in order to extract tax payer funds at ZIRP?
Who can remind me what country did ALL of the above happen?
I decree that whoever answers the above question correctly shall receive.......a lollipop!
Tim makes for the perfect diversion away from real news, like the implosion of China's mega-bubble.
Elsewhere- NYT worries the bumpkins are taking over America! This is not a joke:
http://tinyurl.com/nzfc3or
All paper-pushing, bullshit "mark to fantasy" accounting aside, eventually creating paper/digital reciepts from thin air for claims on real assets will catch up with the planet...
Remember, the Chinese invented paper money, Amercia was actually the last society/government to sever a "hard" link between their currency and PMs (reality).
Same as it ever was...
until it isn't.
Yeah; big whoop. If the Chinese have a bank problem they'll just re-capitalize it. there are advantages to having a complete dictatorship that can do whatever it wants. And even if people become dis-enchanted with the Chinese stock market it'll just drive more hot capital into the US market. Basically, all this huffing-and-puffing about the Chinese houseing bubble is just ignorant nonsense. they don't have the same kind of financial system we did; if people stop buying realestate and the prices drop dramatically; the government can always shoot at few protesters, if there's anyone foolish enough to be a protestor; or a few thousand. There isn't any way a housing bubble is going collapse anything in china so forget about it.
Now, finally, we might get to see what happens when the Fed has to face a recession with interest rates still at zero.
(Recession inside the larger Depression, before somebody points that out)
Don't forget we're not having a recession; GDP is officially in positive territory; we're in a "recovery' Comrade. As long as the illusiion lasts they have no problem whatsoever.
Considering the unreal level of statistics classes I have taken in my life, I think all it need to do is jettison my morals and there just has to be a kick-ass job for me at some .gov agency! Hmmmm..... got to work on my evil laugh this halloween.
Form the guy on the street owing a couple of grand on his credit cards to world governments owing trilions. No one seems concerned about paying back depts.
Dept just does not seem to matter.
Terrorism scare ( ISIS ) check
Pandemic scare ( EDopla) check
Voting fraud ( check)
China implosion ( check )
Choose your distraction wisly...
Someone mentioned boobs on a previous thread. I think I will stick with that one.
There is still a difference btw good debt and bad debt? Who knew.
Good debt gets it's interest payments made on time; bad debt has problems getting it's interest payments; or doesn't get any for extended periods of time; all this from the point of view of the bank. from the point of view of the individual it's probably better not to have any significant debt. as it points out in the Bible, it all depends on whose Ox is getting gored.
I was going all "/s." Should have put it on there! Always nice seeing you around SAT.
1) What are they calling "assets"
2) If $115bn is 1.06% of total advances, how much does it have to be before it matters?
Note - I do realise that we are talking about a bank, a chinese bank at that, so that all figures and reporting are total bollocks (as may be said for much of their economy). Not to suggest ours in the West are exactly splendid models of substance and probity(ref - ECB stress tests rofl).
They are called assets because the bank makes it's income from the interest payments; 1.06% bad loans is insignificant; the article itself is one more example of "let's get excited about something" journalism. it's click bait.
Not sure, well in fact I am positive, a 1% non-performing loan portfolio is not an "epic disaster". I'm no China believer. I think they will meet the same fate as the Soviet Union, but it's gotta get alot worse.
yawn
The wrath of unintended consequences .
"Sheeple wear Wolfskin !"
See
https://www.academia.edu/9031355/The_Were-Sheeples_Almanac
http://andreswhy.blogspot.com/2014/10/were-sheeples-almanac.html
1989 Leo Getz explains China's debt position, one lured by classical Franco-American laissez faire:
http://www.youtube.com/watch?v=gxqv5W77cJg
Leo Getz today: "It's wealth by laundering, so it isn't real. *lights Riggs' cigarette* It's all debt, mKAY?!
Boy, you cops still ain't too bright."
Contained!! Just like Ebola.
http://olduvai.ca