1 00:00:00,080 --> 00:00:02,080 Speaker 1: Let's get to our guess Grace will ahead of greater 2 00:00:02,200 --> 00:00:05,760 Speaker 1: China bank ratings that FIT ratings to discuss China banks outlook. 3 00:00:05,760 --> 00:00:08,559 Speaker 1: We've seen some of the bad debt managers see their 4 00:00:08,600 --> 00:00:11,600 Speaker 1: earnings tank on the property losses. Looking at China Hua 5 00:00:11,680 --> 00:00:14,680 Speaker 1: Wrong and China Sender asset management. Just how much of 6 00:00:14,720 --> 00:00:18,040 Speaker 1: a complication is the downturn in the property sector on 7 00:00:18,079 --> 00:00:22,120 Speaker 1: the overall banking sector grees. Yeah, we we do expect 8 00:00:22,560 --> 00:00:27,920 Speaker 1: profitability pressures to remain for Chinese banks. Apart from lingering 9 00:00:28,000 --> 00:00:32,040 Speaker 1: stress in the property markets, UM, there's also rate cuts 10 00:00:32,080 --> 00:00:35,160 Speaker 1: in China in contrast to most parts of the world, 11 00:00:35,640 --> 00:00:38,680 Speaker 1: so that is going to continue to exert pressure on 12 00:00:38,880 --> 00:00:43,760 Speaker 1: margins on professioning UH. And that also poses challenges on 13 00:00:43,920 --> 00:00:49,840 Speaker 1: bank capital because while they're dealing with these profitability pressures UH, 14 00:00:49,880 --> 00:00:54,320 Speaker 1: the authorities are asking banks to UM support lending to 15 00:00:54,400 --> 00:00:57,040 Speaker 1: the economy in order to stabilize growth. So they are 16 00:00:57,080 --> 00:00:59,120 Speaker 1: facing quite a bit of head winds at the moment, 17 00:01:00,040 --> 00:01:02,560 Speaker 1: you though, and FITS still have a stable rating outlook 18 00:01:02,600 --> 00:01:05,639 Speaker 1: on Chinese banks, so you're not seeing too much concern. 19 00:01:05,720 --> 00:01:07,520 Speaker 1: I guess what are what are some of the opportunities 20 00:01:07,560 --> 00:01:11,959 Speaker 1: you're seeing here? The main reason undepending the stable rating 21 00:01:11,959 --> 00:01:16,600 Speaker 1: outlook for Chinese banks is because of FITCH expectations for 22 00:01:16,720 --> 00:01:21,720 Speaker 1: government support, which underpinned the issuer default ratings for the 23 00:01:21,840 --> 00:01:25,399 Speaker 1: Chinese banks UM on a stand alone basis. In terms 24 00:01:25,400 --> 00:01:29,880 Speaker 1: of the intrinsic credit profile. Uh, indeed, you know, the 25 00:01:29,880 --> 00:01:34,600 Speaker 1: the capital and the profitability pressures are are impacting some 26 00:01:34,720 --> 00:01:37,280 Speaker 1: of the banks. We've already seen some of that in 27 00:01:37,319 --> 00:01:41,720 Speaker 1: the interim numbers, especially if we zone in in the 28 00:01:41,840 --> 00:01:46,240 Speaker 1: MPL ratio for property developers that has continued to increase UM. 29 00:01:46,240 --> 00:01:49,920 Speaker 1: But thankful the banks have been able to smooth out 30 00:01:49,920 --> 00:01:53,880 Speaker 1: some of the earnings impact UM. Given that overall MPO 31 00:01:54,040 --> 00:01:57,840 Speaker 1: racials by and large are still kept quite stable. What 32 00:01:57,920 --> 00:02:00,280 Speaker 1: about those a lot of the social and rest that 33 00:02:00,320 --> 00:02:02,800 Speaker 1: we've been seeing and mortgages not being paid. How much 34 00:02:02,840 --> 00:02:07,160 Speaker 1: does that affect some of the smaller banks. For Fitch 35 00:02:07,360 --> 00:02:11,880 Speaker 1: rated U Universe UM our landers are mostly UM have 36 00:02:12,280 --> 00:02:15,680 Speaker 1: mostly have property exposures that are concentrated in the first 37 00:02:15,680 --> 00:02:20,600 Speaker 1: and second tier cities. UM banks that UM have more 38 00:02:21,520 --> 00:02:24,959 Speaker 1: narrow geographical exposures in some of the lowered cities are 39 00:02:25,040 --> 00:02:28,639 Speaker 1: going to experience greater hits UM. That's why there there 40 00:02:28,720 --> 00:02:32,639 Speaker 1: is quite a bit of polarization UH in terms of 41 00:02:32,880 --> 00:02:37,440 Speaker 1: what's happening with the real estate as quality for some banks. 42 00:02:38,520 --> 00:02:42,000 Speaker 1: But you're saying some perhaps more transparency about some of 43 00:02:42,040 --> 00:02:46,520 Speaker 1: the bank bankruptcy also is kind of needed. Yes, I 44 00:02:46,520 --> 00:02:50,360 Speaker 1: think there are reports about two small banks UM going 45 00:02:50,400 --> 00:02:55,080 Speaker 1: through formal um UM bankency proceedings UH this week, even 46 00:02:55,080 --> 00:02:58,639 Speaker 1: though both banks have UM in some ways been been 47 00:02:59,160 --> 00:03:04,160 Speaker 1: taken over UM by another city commercial bank early in July. 48 00:03:04,919 --> 00:03:07,400 Speaker 1: So the fact that there are now more transparency and 49 00:03:07,440 --> 00:03:12,240 Speaker 1: disclosure around some of these proceedings, we think UNDERPINN the 50 00:03:12,440 --> 00:03:18,839 Speaker 1: authorities commitment and intention to maintain UM financial discipline UH 51 00:03:18,880 --> 00:03:22,040 Speaker 1: and and order within the system. I know you can't 52 00:03:22,080 --> 00:03:25,560 Speaker 1: talk about what kind of government intervention might be needed 53 00:03:26,040 --> 00:03:28,920 Speaker 1: or give policy sort of advice. But if we do 54 00:03:29,080 --> 00:03:32,280 Speaker 1: see a further prop up of the property sector, which 55 00:03:32,320 --> 00:03:34,640 Speaker 1: is kind of what is needed most people are saying 56 00:03:34,639 --> 00:03:38,160 Speaker 1: to turn the Chinese economy around, does that restore by 57 00:03:38,240 --> 00:03:41,360 Speaker 1: a confidence? Does that see people wanting to take on 58 00:03:41,400 --> 00:03:45,000 Speaker 1: more mortgages and more loans. I think I might take 59 00:03:45,040 --> 00:03:48,280 Speaker 1: a bit more than that, because at the moment, the 60 00:03:48,480 --> 00:03:52,200 Speaker 1: holsing um the weaker holsing the man. I think is 61 00:03:52,040 --> 00:03:55,320 Speaker 1: is due to a few factors. I think the economic 62 00:03:55,360 --> 00:03:58,160 Speaker 1: growth is one aspect, but also the fact that you know, 63 00:03:58,760 --> 00:04:03,360 Speaker 1: homebias need to have confidence, um that they're housing projects 64 00:04:03,480 --> 00:04:06,160 Speaker 1: will complete and that they will eventually get the flat. 65 00:04:06,360 --> 00:04:08,120 Speaker 1: So I think that there's more that needs to be 66 00:04:08,160 --> 00:04:13,760 Speaker 1: done to restore bio confidence. Yeah. Absolutely, With people basically 67 00:04:13,840 --> 00:04:17,000 Speaker 1: putting their life savings down and then those housing developments 68 00:04:17,000 --> 00:04:19,839 Speaker 1: not even getting off the ground, what sort of turns 69 00:04:20,080 --> 00:04:23,719 Speaker 1: the broader consumer demand around in China when we're still 70 00:04:23,760 --> 00:04:27,800 Speaker 1: dealing with these pretty strict COVID policies. Yes, we we 71 00:04:27,880 --> 00:04:32,520 Speaker 1: have seen weaker consumer long demand UH. In fact, um, 72 00:04:32,640 --> 00:04:37,400 Speaker 1: well overall long demands still been um, someone constrained in 73 00:04:37,440 --> 00:04:41,880 Speaker 1: the first half because of COVID restrictions and also lingering 74 00:04:41,920 --> 00:04:45,400 Speaker 1: stress in the real estate market. UM. We've seen that, 75 00:04:45,480 --> 00:04:49,200 Speaker 1: for example, you know, deposit growth have outpaced long growth 76 00:04:49,200 --> 00:04:51,400 Speaker 1: in the first half for most banks UH, and that's 77 00:04:51,440 --> 00:04:58,120 Speaker 1: reflecting reduced desire for for consumption. We're looking as well 78 00:04:58,160 --> 00:05:03,040 Speaker 1: at Beijing. Considering my ing overhauling the seven thirty billion 79 00:05:03,040 --> 00:05:05,920 Speaker 1: dollar industry. I mentioned some of the bad debt managers 80 00:05:05,960 --> 00:05:09,560 Speaker 1: like KWA Wrong and China Cinder Asset Management reporting this 81 00:05:09,680 --> 00:05:13,760 Speaker 1: slump in first half earnings again without sort of giving 82 00:05:13,800 --> 00:05:16,000 Speaker 1: your own view on on what Beijing could do. How 83 00:05:16,080 --> 00:05:18,080 Speaker 1: much does it help if we are going to see 84 00:05:18,440 --> 00:05:23,440 Speaker 1: more stimulus pumped in here? Well, the skill of similar 85 00:05:23,560 --> 00:05:27,440 Speaker 1: certainly UM would would make a difference. UM. But the 86 00:05:27,560 --> 00:05:31,760 Speaker 1: what what what's stopping um? The authorities or what's constraining 87 00:05:32,000 --> 00:05:37,160 Speaker 1: um the ability for banks to extend excessive um trying 88 00:05:37,200 --> 00:05:41,080 Speaker 1: to stimulus is a capital constraint because while banks are 89 00:05:41,160 --> 00:05:45,360 Speaker 1: dealing with profitability pressures themselves, um, they they're also under 90 00:05:45,400 --> 00:05:52,000 Speaker 1: pressure to increase their capital in order to meet regulatory requirements. Grace, 91 00:05:52,080 --> 00:05:54,560 Speaker 1: you're also in Hong Kong or what's your outlook on 92 00:05:54,600 --> 00:05:58,599 Speaker 1: the on the property market there? I'm afraid I do 93 00:05:58,640 --> 00:06:01,000 Speaker 1: not cover the Hong Kong Sorry on the bank on 94 00:06:01,040 --> 00:06:03,680 Speaker 1: the banking market, I'm sorry, I just it's Tuesday, it 95 00:06:03,680 --> 00:06:07,360 Speaker 1: feels like my day. The banking outlook for in Hong Kong, yeah, Um. 96 00:06:07,400 --> 00:06:10,080 Speaker 1: For for Hong Kong banks, it's a bit of a 97 00:06:10,120 --> 00:06:13,640 Speaker 1: different story because Hong Kong banks actually benefit quite a 98 00:06:13,640 --> 00:06:16,840 Speaker 1: lot with rising interest rates. So we're actually looking at 99 00:06:16,920 --> 00:06:20,960 Speaker 1: a margin expansion story for Hong Kong as opposed to 100 00:06:21,480 --> 00:06:25,600 Speaker 1: margin pressure for Chinese banks. That's the main difference, al right, Grace, 101 00:06:25,640 --> 00:06:27,440 Speaker 1: always great to have you on. Grace Will is head 102 00:06:27,440 --> 00:06:30,480 Speaker 1: of Greater China Bank ratings at Fitch Ratings.