(Yicai Global) July 14 — Agricultural Bank of China, China Construction Bank and Industrial Bank are among the Chinese lenders who said today that the risks associated with a growing number of home buyers refusing to repay their mortgages as developers struggle to deliver their properties on time, are generally controllable.
The amount involved is not great, accounting for just 0.012 percent of the total outstanding mortgage balance at CNY660 million (USD97.9 million), the Agricultural Bank of China said. Therefore the risks are manageable.
Buyers Demanding
Buyers in around 150 housing projects across 20 provincial-level regions have banded together to demand that developers restart building and that the houses are delivered within a reasonable period of time otherwise they will stop repaying their bank loans, according to the latest data. Most of these unfinished projects are in smaller second, third and fourth-tier cities were there is a glut of properties on the market.
It is not a significant sum, between 0.9 percent and 1.9 percent of the mortgage balance paid in the first quarter at between CNY360 billion (USD53.4 billion) and CNY730 billion, TF Securities said in a recent research report. It will be hard for this amount to cause a systemic shock, it added.
Banks’ Exposure
Industrial Bank has CNY1.6 billion (USD237.2 million) worth of outstanding mortgages involved in this incident and repayment has paused on CNY384 million of this, mostly concerning projects in central Henan province, the Fuzhou, southeastern Fujian province-based lender said. It is still a relatively small amount and will not affect the bank’s operations.
Although the construction of some real estate projects has been suspended and the delivery of apartments delayed, China Construction Bank does not have much exposure to mortgages so the risks are limited, the Beijing-based lender said.
Only a small proportion of Bank of Ningbo’s business is personal home loans and thus the refusal to repay will have little impact, it said.
China Minsheng Bank had issued CNY590 billion (USD87.3 billion) in individual mortgages as of the end of last year, the Beijing-based bank said, adding that it will closely monitor market changes.
China Merchants Bank had no comment to make when contacted by Yicai Global.
Agricultural Bank of China’s share price [SHA:601288] closed up 1.9 percent at CNY2.95 (USD0.40), while the others tumbled. China Construction Bank’s share price [SHA:601939] dipped 1.5 percent to finish at CNY5.58 (USD0.83). Industrial Bank [SHA:601166] sank 3.2 percent to CNY18 (USD2.70), Minsheng Bank [SHA:600016] dropped 0.81 percent to CNY3.68, Bank of Ningbo’s share price [SHE:002142] slid 1 percent to CNY32.57 and China Merchant Bank [SHA:600036] fell 3.7 percent to CNY36.48.