via YAHOO:
Already stung by soaring bad loans and record low net interest margins, lenders such as Industrial and Commercial Bank of China Ltd. may soon be asked for the first time to provide unsecured loans to developers, many of whom are in default or teetering on the brink of collapsing.
The risky lifeline threatens to exacerbate an already bleak outlook. ICBC and 10 other major banks may next year need to set aside an additional $89 billion for bad real estate debt, or 21% of estimated pre-provisions profits in 2024, according to Bloomberg Intelligence. Lenders are now weighing lowering growth targets and cutting jobs among possible options, according to at least a dozen bankers who asked not to be named discussing internal matters.
“The government can’t just ask banks to step up without providing a solution to their issues,” said Shen Meng, a director at Beijing-based investment bank Chanson & Co. “Their profits may still look good on the surface, but if you take a deeper dive into their assets and bad loans, things won’t look good for long.”
China’s banks have been caught between the opposing demands of providing “national service” by supporting the property sector and distressed local governments, and their obligation to run a sound business. Boosting profits has almost become mission impossible for some.
Beijing ratcheted up pressure on the lenders even more last week to reverse the housing meltdown. Regulators are working on a draft list of firms eligible for bank support, while weighing a plan for lenders to offer developers unsecured loans for the first time. This is on top of a recent order for the banks to roll over local government debt at favorable terms to avert a crisis in that $9 trillion market.
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