China Banking - August new loan growth rebounded to Rmb410b, beating market expectations

New loans rebounded to Rmb410b in August, loan-structure continued to improve August's new loan-growth figure was well about market expectations, which was anticipating roughly Rmb300b of new loans for the month. In addition to strong headline numbers, the structure of loan growth continued to improve as well.

There was a total of Rmb159.1b of new corporate loans. Short-term loans increased by Rmb50.9b, medium- to long-term loans increased by Rmb367.5b, and discounted bills decreased by Rmb276.4b. Retail loans also saw strong growth in August, with a total of Rmb251.3b, which was largely driven by strong residential-mortgage loans. Medium- to long-term retail loans increased by Rmb180.6b for the month.

Strong August loan numbers will ease market concerns over liquidity The strong August new-loan figures will ease market concerns that there will be significant shortage of liquidity over 2H09. The continued improvement in loan structure shows that loans are being to finance economic development rather than speculative activities.

Given the CBRC's revised proposal to allow banks to deduct cross-held sub-debt over a series of years, joint-stock banks will be able to resume RWA expansion. The continued decline in discounted bills is also in-line with one of our major themes that will drive NIM expansion over 2H09.

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