China CITIC Bank sees drop in assets of real estate corporate financing

China CITIC Bank Corp Ltd recorded a decline in both risk-bearing assets and non-risk-bearing assets of its real estate corporate financing balance last year, the bank said Friday.

Risk-bearing assets of its real estate corporate financing balance fell by 37 billion yuan ($5.81 billion) from the beginning of 2021 to 397.7 billion yuan at the end of the year. Among the total, the outstanding balance of its real estate loans was 284.8 billion yuan, down 2.8 billion yuan. Other risk-bearing assets, including structured finance, bond investments, financing via non-standard wealth management products and off-balance-sheet activities, dropped by 34.2 billion yuan to 112.9 billion yuan, said Hu Gang, vice-president at China CITIC Bank, a Beijing-based national joint commercial lender.

During the same period, non-risk-bearing assets of its real estate corporate financing balance also declined by 21.5 billion yuan to 65.9 billion yuan, Hu said at a news conference held by the bank to announce its annual results.

"We have been holding a prudent attitude toward lending to the real estate sector in the past 10 years in terms of client selection. Over the period, our head office has been making decisions on which clients in this sector should be given access to loans. Among our existing real estate corporate clients, 99 percent obtained loans with collateral. Only 1 percent — a few leading companies in this sector — received unsecured loans that do not receive any type of collateral," he said.

In terms of regional distribution, among the total balance of the bank's lending to the real estate sector, loans in first-tier and second-tier cities accounted for more than 90 percent. In addition, the bank has increased its provisions for real estate lending, with the ratio of allowance for loan impairment losses to total loans in the real estate sector exceeding 6 percent.

"China is still in the process of releasing risks of the real estate sector in the short term. The final results of risk prevention and control depend on the sales of first-hand and second-hand homes. After this round of regulation of the real estate sector, we are still full of confidence in the sector in the medium and long term as it is a backbone industry of the Chinese economy. Those real estate companies that can survive the latest round of regulatory policy adjustment and improve their assets, liabilities and management as soon as possible will remain competitive," Hu said.

The People's Bank of China, the country's central bank, announced on March 17 it approved the establishment of two financial holding companies in an effort to strengthen risk prevention and enhance financial regulation. One of the newly approved financial holding companies is CITIC Financial Holdings.

"The establishment of CITIC Financial Holdings is part of the efforts to shore up weak links in financial regulation and effectively prevent and control financial risks, especially in terms of implementing segregation of risks between the financial and industrial sectors, preventing risk cross-contagion and realizing centralized and unified management of financial equities to promote regulated and sustainable development," said Fang Heying, president at China CITIC Bank.

"Setting up CITIC Financial Holdings is conducive for the bank to enhance its risk control capabilities as it will help the CITIC Group realize unified risk warning, management and disposal among all clients of its financial subsidiaries. It will also help the bank improve client relationship graphs, strengthen credit risk management of key clients and safeguard the bottom line of avoiding systemic financial risks," Fang said.

With the help of the financial holding company, the bank will be able to integrate the group's advantages and resources in the fields of securities, insurances, trusts and funds to further expand wealth management, asset management and comprehensive financing business, he added.