Profits Are Soaring, But New Data Shows Chinese Banks With Massive 300 Billion Yuan Capital Shortfall

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Photo: emilie raguso on flickr

A massive lending binge over the past couple of years has left major Chinese banks undercapitalized according to a new report from Caing, which has gone through the latest financial reports.Sure, profits are surging, but the bottom line is that these banks are likely to need 200-300 billion yuan (up to $45 billion est.) in 2010 in fresh capital. To put that into perspective, that’s half as much as all the money raised by mainlaind Chinese public companies last year.

Specifically:

Industrial Bank’s capital adequacy ratio slipped to 10.63 per cent at the end of the first quarter of this year from 10.75 per cent at the end of 2009, with its core capital level dimming from 7.91 per cent to 7.59 per cent. The minimum capital requirement for joint-stock banks was raised to 10 per cent by China Banking Regulatory Commission late last year. For six largest banks, it is 11 per cent.

China Citic Bank’s capital adequacy dropped to 9.34 per cent at the end of March, down 0.8 percentage point from the end of last year. The Bank of Ningbao had mixed performance: its core capital level dip from 9.58 per cent at the end of last year to 9.07 per cent at the end of the first quarter while capital adequacy ratio climbed from 10.75 per cent to 10.88 per cent during the time frame.

Read the whole report >

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