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Any BANK withOUT nOrmalised Interest Rate wIll nOt recOver.
When Interest Rate is NEAR-ZERO, ecOnOmy is sIck and eXtremely FRAGILE, bank is at hIghest rIsk Of DEFAULT.
STAY CLEAR OF NEAR-ZERO INTEREST RATE BANKS
$388 billion in Chinese loans at risk
BEIJING
The results of the investigation were published yesterday on the front page of the official
The probe is a first step in what the government has promised will be a thorough effort to clean up the mess left by a surge of stimulus spending to counter the global financial crisis last year.
Local governments, which are officially barred from borrowing, launched thousands of hybrid government company bodies as financing vehicles to get around the restrictions and fund their expenditures, much of which went to infrastructure.
According to the investigation, 24 per cent of the debt incurred by the local financing vehicles is fully backed by revenues from the projects that they have funded.
A second batch of loans, about 50 per cent of the total, will not be recoverable directly from the projects that they have funded. However, these will be covered by secondary sources, such as government revenues.
The third batch is the 26 per cent in serious trouble.
“With the third kind of loans, projects did not conform to regulations; fiscal guarantees did not conform to regulations and there will be serious risks in paying them back. For example, the loans have been embezzled or used as investment capital,” the
Large state-owned banks provided about 40 per cent of the loans to the financing vehicles, while smaller banks accounted for 26 per cent and government-controlled policy banks the remaining 30 per cent.
pharoah88 ( Date: 01-Oct-2010 15:13) Posted:
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Fw: HK: (BN) ICBC Shares Fall After Goldman Sells $2.25 Billion Holding : Bloomber
ICBC Shares Fall After Goldman Sells $2.25 Billion Holding
2010-09-30 03:15:59.930 GMT
By Bloomberg News
Sept. 30 (Bloomberg) -- Industrial & Commercial Bank of
China Ltd. dropped by the most in four months after Goldman
Sachs Group Inc. sold a stake in the world’s largest lender by
market value for HK$17.45 billion ($2.25 billion).
The stock fell 3 percent to HK$5.79 as of 11:01 a.m., after
dropping as much as 3.7 percent. Goldman Sachs sold 3.04 billion
ICBC shares at HK$5.74 each, according to a sale document sent
to fund managers. The number of shares sold was expanded from
2.75 billion initially offered.
Today’s loss extended this year’s decline in ICBC shares to
10 percent, cutting the company’s market value to $212 billion.
ICBC, which plans to raise as much as 45 billion yuan ($6.7
billion) in a rights offer, may be poised to rebound along with
other Chinese lenders as they complete fundraising to comply
with stricter capital rules, said analyst Cheng Jiaoyi.
“This is not an ideal time to sell from the valuation
point of view unless you are really pessimistic about China
banks,” said Cheng, a Shanghai-based analyst at Qilu Securities
Co. who recommends buying bank shares. “My guess is that
Goldman Sachs’ move is to raise money so that it can take part
in ICBC’s upcoming rights offer.”
Yesterday’s sale was Goldman Sachs’s second offering of
shares in the Chinese bank after its initial ICBC investment in
2006. The stake Goldman Sachs sold yesterday fetched about four
times what the New York-based firm paid for it, and followed a
divestment of almost $2 billion in June 2009.
The Beijing-based lender has more than tripled profit since
receiving a government bailout in 2005 and is poised to defend
its position as the world’s most profitable lender for a third
straight year in 2010 with net income of $23.8 billion,
according to analysts surveyed by Bloomberg.
Loans Concern
That hasn’t been enough to dispel concerns among investors
that last year’s record lending by Chinese banks may result in a
pile-up of bad loans should the world’s fastest-growing major
economy lose steam.
BNP Paribas SA analysts led by Dorris Chen said in a note
today that recent meetings with investors in the U.S. confirmed
a lack of conviction in China’s banking industry because of
uncertainty about the government’s efforts to force lenders to
bolster their capital.
Goldman Sachs joins rival banks including UBS AG, Bank of
America Corp. and Royal Bank of Scotland Group Plc in trimming
holdings in Chinese lenders that they bought about five years
ago, when China’s government was preparing lenders for going
public.
Goldman Sachs bought 4.9 percent of ICBC for about $2.59
billion in April 2006, when the U.S. bank invested $940 million
and funds managed by the company paid about $1.65 billion for
stakes in ICBC six months ahead of the Chinese lender’s initial
public offering, according to a regulatory filing.
‘Strategic Partner’
The U.S. company will continue to own 10.1 billion shares,
or a 3 percent stake, in ICBC, which may be sold at any time.
Goldman Sachs had last year agreed to extend the lockup period
for 80 percent of its initial holding of 16.47 billion ICBC
shares until April 2010.
Goldman Sachs reaffirmed its commitment to cooperating with
ICBC and will continue to be a “strategic partner” after the
stake sale, the Chinese bank said today in a statement.
Allianz SE and American Express Co. sold a combined $1.9
billion of shares in ICBC in April 2009 after a lockup on their
stakes ended, giving the two a total profit of about $1.3
billion on the sales.
Goldman Sachs shares slid 59 cents, or 0.4 percent, to
$144.42 in New York yesterday.
For Related News and Information:
Hong Kong block trade news: TNI HK BLK <GO>
Top corporate finance news: DTOP <GO>
ICBC share sale history: 1398 HK <Equity> CACS36 <GO>
Goldman acquisition history: GS US <Equity> CACS21 <GO>
Top finance stories: FTOP <GO>
--Luo Jun, Bei Hu. Editors: Russell Ward, Philip Lagerkranser
To contact the reporter on this story:
Bei Hu in Hong Kong at +852-2977-6633 or
bhu5@bloomberg.net
To contact the editors responsible for this story:
Andreea Papuc at +852-2977-6641 or
apapuc1@bloomberg.net;
Philip Lagerkranser at +852-2977-6626 or
lagerkranser@bloomberg.net
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