Banks face Us$212bil in losses from real estate

HONG KONG: China’s property slump is estimated to cost the nation’s banking system as much as 1.5 trillion yuan (Us$212bil or Rm966.5bil) 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.”

Yan estimates that China banks have roughly 88 trillion yuan (RM56.9 trillion) of exposure to real estate and said that the stabilisation of the sector was “critically important” in preventing them from suffering further losses.

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 new guidelines indicate “much stronger and comprehensive central government support” for the property sector, Yan said. —