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Henry_Chinaski
Board Lord
Joined: Aug 16, 2003
Posts: 5025
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 Posted:
Aug 04, 2004 - 11:39 AM |
 
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| Post subject: S&P Raises Ratings on Two Chinese State Banks as Financi |
S&P Raises Ratings on Two Chinese State Banks as Financials Improve
US credit ratings agency Standard and Poor's (S&P) yesterday raised its long-term foreign currency counter-party credit ratings on the state-owned Bank of China and the China Construction Bank to 'BBB-' from 'BB+' on a stable outlook. The upgrade was attributed to the stabilisation of the balance sheets of the two banks following a US$45bn capital injection that kick-started a new restructuring programme. Reform of the two banks is being used as a pilot for reform of the system as a whole.
Significance: The ratings upgrade will provide a boost to the government's bank reform programme, crucial to the economy's evolution to a more market-based economy. Reform of the two banks is being used as a pilot for restructuring of the system as a whole, with pressure being exerted by China's commitment to open the sector to foreign competition by 2006 under World Trade Organization rules.
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Good news. And came from S&P, not from the state media.
Reinforces China's commitments and actions in SOLVING THEIR PROBLEMS. This again proves that the guys running the macro show here are absolutely commited to do what it takes to take China to the next level. Way to go, kudos to the guys in Beijing.
Let's see how many answer and views this post gets. Probably not many. |
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smurfette
PopStar
Joined: Nov 07, 2003
Posts: 1287
Location: smurf village
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Aug 04, 2004 - 02:46 PM |
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BB+
How good is it? Or how bad is that? |
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statistically significant |
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izanami
PopStar
Joined: Jan 27, 2004
Posts: 1037
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Aug 04, 2004 - 10:32 PM |
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BB+ means it's investment grade...i.e.: if these banks issue bonds, you face less credit risk as an investor because the banks are in better financial shape.
I think it's only a matter of time that bank reforms take place. It would be embarrassing for Chinese banks to perform poorly against foreign competition once the banking sector gets opened up.
What's the basis for improving the credit rating? I hope it's not a lower NPL ratio....because that could be easily lowered with loan expansion.
The central government's response to the current overheating in certain sectors and the structural imbalances in the economy do show a commitment at the top level. But it will be a formidable task....getting BOC and CCB to an IPO. I've read that it's like listing BOC is like listing 30 banks at a go. And there's the usual issue of execution at the local level. There needs to be a proper alignment of performance incentives at every level...down to the local branch manager making that loan to the next town project. |
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Tell me what you eat, and I will tell you what you are.-- Brillat-Savarin |
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tx2sh
Reacher
Joined: Jan 22, 2004
Posts: 209
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Aug 05, 2004 - 11:13 AM |
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i don't know much about the banking industry so i don't know if the ratio is part of the criteria, but i read that the banks have sold billions of dollars of npl's...maybe that helped. |
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Henry_Chinaski
Board Lord
Joined: Aug 16, 2003
Posts: 5025
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Aug 05, 2004 - 12:18 PM |
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What appears to be happening is that the banks watered down the NPL rate by increasing the volume of loans, which is a dangerous proposition if the risks where not properly managed.
Percentually speaking the loans decreaed but in total the hole is still there, for all to see, like a crater in the moon.
The bold measurement the government took to burn 40+ billion usd of reserves to sanitate the NPLs is one of the alternatives to solve the problem without a too strict credit restriction that would damage growth (and hence spill over to unemployment, ...). However, this is something you are only able to do while you have reserves at a certain level. And considering China will have a trade deficit instead of surplus this year (specially because of oil price, accentuated by the electricity crisis) and you can start seeing the size of the problem. Add to that the RMB floating issue and boom, you have a blanket that is way to short to cover everything confortably. Now factor into account China's trade surplus with the US and the upcoming interest rate hike from Greenspan (and hence less exports from China to the US) and what was rosy 2 years ago looks now like the imponent Hindenburg. Let's just hope the lighting to make it catch fire is not gonna happen. But it's gonna be fun to watch. Guys in Beijing are on top of the issues though, and that's where you can clearly see how competent high-level officials (and let me stress high level here) are. |
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fukuman
Wonder Wit
Joined: Sep 18, 2003
Posts: 3699
Status: Offline
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Aug 09, 2004 - 02:30 AM |
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yeah kudos to the guys in beijing. im quite hopeful, i wouldnt take their job 4 love or money.
btw, ive really liked your posts in this section HC, shame about the other sections. |
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Goosie
Board Grand Dame
Joined: July 16, 2003
Posts: 4776
Location: Singapore
Status: Offline
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Aug 09, 2004 - 12:20 PM |
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Henry_Chinaski
Board Lord
Joined: Aug 16, 2003
Posts: 5025
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Aug 09, 2004 - 02:07 PM |
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Well, tks for the compliments. As for the complaints: I can't please everybody can I? And I don't particularly care about what you 2 think about my posts in other sections.
So, let's grow up and stop wasting time, shall we? |
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MaomingMaster
Board Legend
Joined: Feb 03, 2004
Posts: 11059
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Aug 09, 2004 - 02:11 PM |
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Jesus, HC!! They said they liked your posts here - why not accept the compliments with a little grace?
Grow up? Yes, let's. |
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cmattj80
Lurker
Joined: July 15, 2002
Posts: 22
Location: Shanghai
Status: Offline
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Aug 09, 2004 - 03:45 PM |
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The two banks have lowered their NPL ratios this year, although I don't believe this is a result of increasing the volume of loans. In fact, in the past 3-4 months, the government has made an effort to curb the number of new loans coming from the state controlled banks. However, as tx2sh mentioned earlier, they have in fact sold off a number of their NPLs to their respective Asset Management Companies that the state set up to help reduce the bad loans as well as to Goldman sachs. The two banks have also been boosting their capital adequacy ratio's. Both banks have put for plans to issue bonds in the past month to do this as they are looking to get their capital adequacy ratio's above 8%, the international norm set forth in the originial Basel accord, before planned public listings next year. With the bond sale, China Construction Bank's capital adequacy ration will exceed the international norm, as it reaches 8.2% I believe and Bank of China's is not too far behind. |
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