Half of China’s Big Banks Cut Property Sector Lending; Evergrande to Pay Creditor Fees

More than half of China’s big banks reduced their exposure to the property sector last year, as per Asia Nikkei. 17 out of 32 leading banks listed on the HKEX including China CITIC Bank and China Minsheng Bank (the largest state-owned and private-owned banks respectively) saw a decrease in outstanding loans to the sector in 2021. For example, Shengjing Bank, a major Evergrande shareholder saw its lending to developers drop after nearly doubling it in 2020. China Everbright Bank saw real estate loans fall 12% last year. Besides, other regional lenders too have cut down exposure to the sector. The NPL ratio combined across the largest four banks climbed over 100bp to 3.8%. According to China Real Estate Information, total cash raised by 100 major developers, including bank loans and corporate debt, dropped 59% YoY to RMB 39.8 ($6.2bn) in February.  Lending towards the sector is expected to be cautious in 2022 also, even as some rules are set to ease.

Separately, Evergrande agreed to pay the adviser fees of a bondholder group working to restructure debt. The bondholders and creditors have been working with Moelis & Co. and Kirkland & Ellis, from the time Evergrande delayed coupon payments in October and some asset-sale plans had collapsed..