<News Alert> China Banking Sector: Jul Total Social Financing Rmb 334.9tr, 10.7% y-o-y growth, below market expectation
- Jul 2022 outstanding Total Social Financing (TSF) balance increased by 10.7% y-o-y to Rmb 334.9tr. The growth is 0.1ppt lower than that in Jun.
- New TSF increment in Jul was reported as Rmb 756bn. The increment is Rmb 319bn lower than the same period last year, lower than the consensus expectation of c.Rmb 1.35tr and significant lower than the new increment in Jun of Rmb 5.17tr.
- Outstanding balance of Rmb loan to real economy by the end of Jun was Rmb 205.5tr, or 10.9% y-o-y growth.
- New increment of Rmb loan to real economy in Jul was Rmb 410bn. The increment is Rmb 430bn lower than the same period last year and significant lower than the consensus expectation of c.Rmb 1.12tr.
- Following a strong Jun TSF number and due to seasonality impact, market has expected a significant drop in TSF in Jul compared with Jun. Still, the Jul TSF new increment number is largely below expectation, indicating a lower-than-expected demand for credit.
- Looking forward, the macro environment is still challenging. The mortgage boycott may negatively affect the retail loan growth in the next few months. Our house view expects no further LPR and RRR cut in the rest of the year. The loan growth in 2022 might be below our original expectation of c.11-12%.
- Expect negative impact on the share performance of China banking sector. We maintain our neutral view on the sector and prefer HK banks at the time being with top pick as BOCHK (2388 HK). Still, we pick PSBC (1658 HK) and CMB (3968 HK) for the long run.