CHINA FINANCIAL DAILY：BONJ FY16 RESULTS;TIGHTER CONTROL ON CROSS GUARANTEE
China Insurance Sector - March premiums – exceptional growth continuedin Life; robust P&C
BONJ FY16 NPAT Up 14.8% yoy with 20% Div Payout
CBRC to Crack down Credit with Cross Guarantee
NSSF’ s Lou: China Local Government Debts Have Started to Default
Zhongyuan Bank Filed IPO Application with the HK Exchange
PBOC Noticed Recent Market Fluctuation Resulted from IntensifiedRegulations
PBOC Injects Rmb170bn Net Liquidity into Market via OMO This WeekDB Research
China Insurance Sector - March premiums – exceptional growth continued inLife; robust P&C
Life premiums recorded strong growth of 4.4-61.9% in March (vs. -44.0-41.9%in February, due to CNY effect). Taiping led, at 61.9% yoy, on a low base, andNCI reported positive growth for the first time since January. Based on PingAn’s disclosure, FYP (ex-Grp) recorded the highest growth, at 87.6% (vs. 62.9%in February and 37.3% in January), likely driven by the agency channel, whichshould bode well for VNB growth. P&C premiums were largely stable, with keyplayers’ growth ranging from 9.0% to 35.3% (vs. 13.8-32.7% in February),despite slower auto sales. We maintain our positive view on China insurers.Top Stories
BONJ FY16 NPAT Up 14.8% yoy with 20% Div Payout (The Company, Apr 20)
Bank of Nanjing (BONJ) posted its 2016 PPOP and NPAT of Rmb19bn andRmb8bn (after deducting prefer shares dividend), up 21.7% and 14.8% yoyrespectively. The results were mainly driven by aggressive asset growth (up32% yoy), improved credit cost (down 20bps yoy to 2.90%) and fee income (up17.5% yoy), dragged by NIM compression (down 45bps yoy to 2.16%). Assetquality wise, the bank recorded a slower NPL formation ratio at 1.40% (2015:1.54%), with NPL ratio up slightly by 4bps yoy to 0.87% and provisioncoverage ratio remained sufficiently at 457% (vs. 431% in 2015). However, ourconcerns on BONJ remain, with regard to its elevated shadow bankingexposure (24% of total assets) and weak capital. Meanwhile, the bankcontinued to record a flattish dividend payout ratio of 20%, on the back ofweak capital position with CET-1 and Tier-1 ratios down 1.2% and 0.6% yoy to8.21% and 9.77% respectively.
CBRC to Crack down Credit with Cross Guarantee (Caixin, Apr 21)
CBRC on Apr 6 released a notice (Circular 52) in subject to investigation onbank credits with cross guarantees from corporate. The notice required localCBRC branches to pay key attention on corporate clients with heavier relianceon private lending and engaged in cyclical industries such as coal and steel.Additionally, banks are advised to focus on primary repayment source ratherthan excessive reliance on guarantee and pledges in credit risk management.
NSSF’ s Lou: China Local Government Debts Have Started to Default (Caijing,April 21)
Some china local government debts have started to default, according to aspeech given by Lou Jiwei, the former minister of finance, currently thechairman of National Social Security Fund on a conference on Friday.However, he said that is good thing for China in certain extent as it signals thatthe central government declines to bail out local governments who tookexcessive risk. Lou also said China household sector is leveraging up to 50%and it should not be “hasty” in pushing for deleveraging in China. Besides, thecalculation of China government debt ratio should take account of nonstandardPPP projects and government industrial leading funds.
Zhongyuan Bank Filed IPO Application with the HK Exchange (Wallstreetcn,April 21)
Zhongyuan Bank has filed an IPO application with the Hong Kong StockExchange in subject to the issuance of up to 3.45bn new shares, local mediareported. Zhongyuan Bank, merged by 13 local city commercial banks in 2014,is the largest city commercial bank in Henan Province at present. It is one ofthe few provincial-level city commercial banks. Henan Investment Group andYongcheng Coal& Electricity are the largest shareholders of the bank withstakes at 9.02% and 7.42% respectively. For 2016, the bank reported totalNPAT Rmb3.4bn, up 11.5% yoy, with NPL ratio of 1.86% (down 9bps yoy),coverage ratio of 207% (down 3.4% yoy) and Tier-1 CAR of 11.25% (down3.5% yoy).
PBOC Noticed Recent Market Fluctuation Resulted from Intensified Regulations(Caijing, Apr 20)
PBOC has noticed banks’ redemption of entrusted investment funds from nonbankfinancial institutions recently due to escalating financial regulations, andit is even concerned that the fast and strict financial deleveraging may lead tomarket confusion somehow, local media reported. Media reported earlier thatcommercial banks are withdrawing their entrusted investment funds from nonbankfinancial institutions in large scale amid unsatisfactory investment yields,tight liquidity and enhanced regulations, which has led to bond and equitymarket adjustment.
PBOC Injects Rmb170bn Net Liquidity into Market via OMO This Week (PBOC,Apr 21)
PBOC sold Rmb100bn of reverse repos at flattish yields on Friday, includingRmb60bn of 7-D reverse repos at 2.45%, Rmb20bn of 14-D and 28-D reverserepos each at 2.60% and 2.75% yields respectively. With Rmb190bn of reverserepos matured, PBOC injects net liquidity of Rmb170bn into the market viaopen market operation this week, making the largest liquidity injection in threemonths, compared with net liquidity injection of Rmb70bn last week.
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