China Economic Scan Weekly Debt Market Review

The CSI Enterprise Bond Index started the week at 117.30, and slippedto a low of 116.95 shortly after opening, but closed the week up at117.37. The Shenzhen Corporate Bond Index started the week at 130.82,hit a low of 130.72 on Wednesday and finished the week up at 130.89.

The CSI Enterprise Bond Index started the week at 117.30, and slipped to a low of 116.95 shortly after opening, but closed the week up at 117.37. The Shenzhen Corporate Bond Index started the week at 130.82, hit a low of 130.72 on Wednesday and finished the week up at 130.89.

China’s Ministry of Finance said Friday it would offer 30 billion yuan ($4.39 billion) worth of treasury bonds next week in two equal tranches. China is increasing Treasury bond issues to finance its 4-trillion-yuan stimulus package over the next two years.

China’s central bank auctioned 70 billion yuan ($10 billion) in 3-month bills in its regular open market operations on Thursday, up from 55 billion yuan a week ago. It drained 45 billion yuan from the money market on Tuesday via 28-day bond repo’s. A total of 132 billion yuan in central bank bills and repos is due to mature this week. Last week, the central bank conducted a net drain of 26 billion yuan.

New yuan lending by Chinese banks has exceeded 5 trillion yuan ($733 billion) since the start of 2009, the official Shanghai Securities News reported on Monday. Pointing to new loans in April of at least 420 billion yuan. The official China Securities Journal reported on Monday that a senior Chinese banking regulator said he expected new loans this year to reach 8 trillion yuan.

The major Chinese banks announced their Q1 2009 profits this week:

ICBC increased its net profit in Q1 by 6.2% year on year to 35.15 billion yuan. ICBC increased lending by 636.4 billion yuan, and had a bad loan ratio of 1.97% (down from 2.29 % in Dec). ICBC’s net interest income dropped 13% to 57.75 billion yuan and net fee and commission income from services such as credit cards, wealth management and insurance sales rose 9.7% to 13.55 billion yuan.

Bank of China said net income fell 14% to 18.57 billion yuan ($2.72 billion) Q1 2009, beating analyst forecasts of 17.8 billion yuan. Bank of China offered 511 billion yuan of new loans in Q1 2009, taking total advances to 3.81 trillion yuan as of March 31, up 15.5%.

Bank of Communications Q1 2009 earnings were up 1% to 7.94 billion yuan, beating analyst estimates of 6.5 billion yuan; loans increased by 21%.

China Construction Bank’s Q1 net profit fell 18.2% YoY to 26.3 billion yuan ($3.85 billion). Interest income was 50.87 billion yuan, down 6.55%, reflecting the PBOC’s 5 interest rate cuts since Sep. As of the end of March, non-performing loans (NPL) totaled 81.9 billion yuan, down 1.95 billion yuan from the end of last year. Its NPL ratio was 1.9%, down 0.3 percentage points from the end of 2008.

China Merchants Bank Co. Q1 09 profit fell 33% to 4.21 billion yuan ($617 million), or 0.28 yuan a share; and below analyst estimates of 4.64 billion yuan. Net interest income fell 23% to 9.2 billion yuan in the first 3 months after the net interest margin, a measure of lending profitability, narrowed to 2.47%. Net fee and commission income dropped 14% to 1.67 billion yuan.

Agricultural Bank of China, which is planning an IPO soon, said its net profit increased 17.5% to 51.45 billion yuan in 2008. Its NPL was 4.3% at the end of 2008 – down 19.3 percentage points from the end of 2007. It’s total assets were just over 7 trillion yuan at Dec 08, up 32.2% year on year.

Citic Securities, China’s biggest brokerage firm by market value, said its net profit for Q1 09 fell 40% to 1.5 billion yuan ($219.8 million) on revenue of 3.46 billion yuan, down 40% as commission fee income nearly halved to 2.87 billion yuan. Commission fees: securities underwriting income fell 81% to 117.8 million yuan and securities brokerage income fell 19% to 2.09 billion yuan. Investment income dropped 86% to 285.5 million yuan from 2.08 billion yuan a year earlier.

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