Major Chinese lender Ping An Bank has put 41 developers on a list of property firms eligible for its funding support, a shift towards more lending to a sector in crisis following government steps to staunch the pain.
The bank decided to adjust criteria related to extending credit lines to meet builders’ reasonable funding demands, people familiar with the matter said, requesting anonymity discussing private matters. That mirrors a task that authorities set out in a major annual government economic conference last month, and comes after regulators drafted their own list of developers to guide financial institutions as they weigh more lending.
Market reactions were mixed. Chinese developer dollar bonds were indicated 0.5 cents higher on average after the news. But shares slumped for companies not on Ping An Bank’s list, including Country Garden Holdings, Shimao Group Holdings and Sunac China Holdings.
“It’s hard to say how much benefit companies on that list will receive from the bank’s lending, but companies not on that list will be regarded by investors as abandoned by the bank,” said Shujin Chen, analyst at Jefferies Financial Group. “Ping An Bank’s exposure to the property sector is not small, so its list can also be seen as a signal for the sector.”
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The development offers a fresh example of how financial firms are responding after Beijing stepped up efforts to ease a cash crunch among builders, as an unprecedented housing slump and debt crisis that has led to record defaults worsens. Authorities also recently called on local governments to better support developers’ financing needs, including drafting a list of projects eligible for funding.
The changes to Ping An’s lending criteria also involve areas including risk assessment and approval procedures, according to the people.
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It’s not immediately clear how many and which new names were added to the list, they said. More than half of the builders on the current list are state-backed companies including Poly Property Group and Beijing Urban Construction Group. The rest cover private-sector peers such as Longfor Group Holdings, China Vanke and Gemdale.
Ping An Bank distributed the list to its departments and branches earlier this month, the people added.
Ping An Insurance (Group), parent of Ping An Bank, had previously said it is trying to reduce exposure to the sector, and regulators have been encouraging insurers to focus on their core business. The latest list marks a shift in strategy and may see other banks follow suit.
The bank told its departments and branches that they should extend full lending support to developers on the list operating normally, and refrain from cutting or suspending credit lines, said the people. The lender also urged them to use maturity extensions and rescheduling payment arrangements to alleviate developers’ liquidity pressure, the people added.
A representative at Ping An Bank did not respond to a request for comment.
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While Chinese property bonds have traded firmer recently on the back of increasingly supportive policy rhetoric, “we caution against aggressively chasing high-yield China property bonds as banks continue favouring state-linked developers, and home sales have not visibly turned around despite all the property easing measures”, said Zerlina Zeng, an analyst with CreditSights Singapore.
Ping An Bank ranked as the country’s 13th-biggest bank by assets last year, according to local media citing a league table from the China Banking Association.
Its list also includes local builders such as Hangzhou Binjiang Real Estate Group and Greentown China Holdings, as well as Hong Kong developers including New World Development and Sun Hung Kai Properties.
Greentown declined to comment, while Vanke, Longfor, Gemdale, Poly Property, Hangzhou Binjiang, New World Development and Sun Hung Kai did not immediately reply to request for comment.