Bank loans

China April new bank loans plummet as COVID shakes economy

* April new loans 645.4 billion yuan vs. 1.52 trillion yuan f’cast

* April M2 money supply +10.5% y/y, vs. f’cast of +9.9%

* April TSF 910.2 billion yuan, against f’cast 2.15 trln yuan

* C.bank pledges to step up support for slowing economy

BEIJING, May 13 (Reuters) – New bank lending in China hit its lowest level in nearly four-and-a-half years in April as the COVID-19 pandemic rocked the economy and weakened demand for credit, central bank data revealed on Friday, after pledging to intervene. support to head off a more marked slowdown.

Chinese banks extended 645.4 billion yuan ($95.14 billion) in new yuan loans in April, down about 80% from March and the lowest level since December 2017, the data shows. of the People’s Bank of China.

Lending far exceeded expectations as analysts polled by Reuters had predicted new yuan lending would fall to 1.52 trillion yuan in April from 3.13 trillion yuan in the previous month and from 1.47 trillion yuan. yuan a year earlier.

“Lending was much weaker than expected last month as lockdowns weighed on credit demand. This should prompt the PBOC to announce further easing measures soon,” Capital Economics said in a note.

“But the central bank continues to signal a relatively moderate approach.”

The powerhouse said the sharp slowdown in new lending in April reflected the impact of COVID on the real economy.

“Companies, especially small, medium and micro enterprises, have had more difficulty in operating and the demand for effective financing has dropped significantly,” he said.

Household loans, including mortgages, were contracted by 217 billion yuan in April, against 753.9 billion yuan in March, while corporate loans fell to 578.4 billion yuan in April against 2.48 trillion yuan in March, according to central bank data.

Full or partial shutdowns to stop the spread of COVID in dozens of Chinese cities, including a city-wide shutdown in the commercial center of Shanghai, have hit the economy hard.

To cushion a sharp slowdown in economic growth, the central bank reduced the amount of cash banks must hold as reserves from April 25, and more modest easing measures are expected.

LIMITED ROOM FOR LODGING

The central bank said on Monday it would step up support for the slowing economy, while closely monitoring domestic inflation and monitoring policy adjustments in developed economies.

But analysts say the room to ease policy could be limited by fears it could fuel capital outflows as the Federal Reserve raises interest rates. Reducing borrowing costs may have only limited impact if consumers and businesses remain in lockdown.

“It’s hard to decide because lowering interest rates is not a direct way to help an economy that has been damaged by lockdowns,” ING analysts said.

“Tax measures would be more effective, and there are quite a few for small and medium-sized businesses and individuals.”

M2 broad money supply rose 10.5% from a year earlier, central bank data showed, above Reuters poll estimates of 9.9%. M2 rose 9.7% in March compared to a year ago.

Outstanding yuan loans rose 10.9 percent in April from a year earlier, compared with 11.4 percent growth in March. Analysts were expecting growth of 11.4%.

Growth in the total stock of social finance (TSF), a broad measure of credit and liquidity in the economy, slowed to 10.2% in April from a year earlier and 10.6% in March.

The TSF includes forms of off-balance sheet financing that exist outside of the conventional bank lending system, such as initial public offerings, trust company loans, and bond sales.

In April, the TSF fell to 910.2 billion yuan from 4.650 billion yuan in March. Analysts polled by Reuters had expected an April TSF of 2.15 trillion yuan. ($1 = 6.7835 Chinese yuan renminbi) (Reporting by Judy Hua and Kevin Yao; Editing by Simon Cameron-Moore, Robert Birsel and Louise Heavens)