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More than 10 Chinese banks scramble to disclose their exposures to mortgage defaults and stressed the risks are “controllable,” after homebuyers across 18 Chinese provinces refuse to pay mortgages as the properties they bought were left unfinished due to developers’ liquidity difficulties.
Industrial and Commercial Bank of China (ICBC), the country’s largest state-owned lender by asset, said on Thursday that the outstanding non-performing mortgage loans involved in suspended property projects currently amount to 637 million yuan ($94 million), accounting for only 0.01% of the bank’s total outstanding mortgage loans, with risks controllable.
The volume of mortgages that homebuyers had stopped repayment totals 384 million yuan so far, which are concentrated in key risk areas in Central China’s Henan province, ICBC said.
Agricultural Bank of China, one the country’s Big Four state-owned lenders, said that it initially recognised 660 million yuan in overdue mortgage loans involving property projects with risks of delivery delays, accounting for 0.012% of its outstanding mortgages and 0.017% of its outstanding mortgages for new home projects.
As of the end of June, ABC’s outstanding mortgage loans stood at 5.34 trillion yuan and of that, 3.97 trillion yuan were mortgages for new home purchases, concerning about 57,000 property projects, it said.
Given the smaller scale of businesses with property delivery exposure, the bank found the overall risk manageable, it said.
The bank has step up a coordination mechanism and started a thorough check into the property projects it’s involved in, ABC said.
China Construction Bank, another Big Four lender, said that its exposure to property projects whose construction has been suspended and home deliveries delayed is small and the overall risk is controllable, without providing specific size of mortgage defaults.
The preliminarily identified suspension of construction involving overdue housing loans is 127 million yuan, a relatively small scale and proportion, with risks that are controllable, Postal Savings Bank also said, stressing that the bank’s housing loan balance exceeds 2 trillion yuan, and the real estate non-performing loan ratio is at a low level.
Industrial Bank, a joint-stock bank, said that its outstanding mortgage loans involving property projects with risks of delivery delays amount to 1.6 billion yuan, of which, outstanding non-performing mortgage loans totals 75 million yuan.
Of the amount, payment of 384 million yuan mortgages has been suspended by homebuyers, mostly in central China’s Henan province, the bank said.
The size of mortgage involving properties with the risks of delivery delays is small and won’t have major impact on the bank’s operation, it said.
In addition, China Communications Bank, China Merchants Bank, Ping An Bank, Minsheng Bank, China Everbright Bank, Jiangsu Bank and Nanjing bank also released similar statements saying their exposures to mortgage defaults are limited and risks are controllable.
Banks’ statements came after more and more home buyers across China refuse to pay mortgages as the properties they purchased have been left unfinished amid the liquidity crunch in the real estate sector.
As of July 12, home buyers of more than 100 property projects across provinces including Hubei, Henan, Shandong, Jiangxi, Jiangsu, Hunan and Shaanxi had issued statements saying that they refuse to pay mortgage loans as the properties they purchased have been left unfinished. Read more …
According to data from the China Real Estate Information Corporation (CRIC), as of the end of 2021, the property projects with home delivery delays in the 24 major cities accounted for 10% of the total property transactions by floor space in the cities last year, with most risks seen in the cities of Zhengzhou, Changsha, Chongqing and Wuhan.
Shares of Chinese banks traded lower, with an index tracking mainland-listed banks, compiled by Wind Information, down 2.1% after sliding 2.3% in the previous trading day.