Monday, April 23, 2012
China’s Biggest Banks Are Squeezed for Capital
Within the last year, seven of the biggest Chinese banks tapped the markets for 323.8 billion renminbi ($51.4 billion ) in new funds, according to Citigroup estimates. Several financial firms are expected to raise another $17.7 billion in the next few months, with China’s fifth-biggest lender, the Bank of Communications, accounting for $9 billion. Banks around the world have been tapping investors for new funds as they struggle with slumping share prices and waning profits. But Chinese firms have maintained that their profit growth is strong and their balance sheets are solid, raising red flags among some analysts about the banks’ persistent capital needs.
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How are the Chinese firms maintaining their profit growth with the depreciation involved in releasing renminbi into the market? This may be related to the current deficit for 2012.
Haven't we heard a story about banks overextending themselves by loaning in an unstable market before? Allusions to a property bubble in China have been made, and it seems like the issue is coming to a head. The repercussions of a Chinese financial crisis could set the world back a decade. More to the article, I had no idea Chinese banks were so monopolized. That the US's most profitable bank doesn't make as much as the least profitable of the "Big 4" is astounding. But one must wonder what the relative shares of the market each bank has is.
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