China’s property slump is estimated to cost the nation’s banking system as much as 1.5-trillion yuan (R3.67-trillion) in losses on loans, bonds and other assets, according to UBS Group AG.
Such a loss will be “digestible by the banking system as the banks have strong earnings power and high” reserves against non-performing assets, May Yan, the bank’s head of Greater China financials equity research, said in a report. “As such, we don’t expect any banking system crisis at this point.”
Chinese authorities over the weekend rolled out a sweeping package to help the embattled sector. Regulators issued a 16-point plan to financial firms, with measures that range from addressing a liquidity squeeze at developers to loosening down-payment requirements for homebuyers. The Swiss bank expects a low rate recovery on unsecured loans and bonds, and added that if stalled property projects aren’t completed, banks could suffer further losses from mortgages. They may also sustain losses from off-balance sheet contingent liabilities.
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