Financial support has been accelerated, and bank loan trends for real estate enterprises have been analyzed

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In the short term, the current risks in the real estate industry are still in the process of being cleared, and major banks are still cautious about real estate loans.

◎ Text / Fang Ling, Yi Tianyu, Hong Yuhuan

Financing of real estate enterprises continues to be sluggish

The government supports the improvement of the financing environment for non-state-owned real estate enterprises

1. In 2023, the financing of real estate enterprises will continue to deteriorate, and it will continue to concentrate on central state-owned enterprises (some omitted)

Looking at the financing situation of real estate enterprises in recent years, it can be found that its large-scale contraction began with the introduction of the "three red lines" in August 2020, and as the policy shifts the regulatory focus of real estate enterprise financing from channel supervision to "enterprise" supervision, the debt reduction of real estate enterprises has become the main keynote, and the financing scale has begun to decline after November 2020. After entering the second half of 2021, due to the impact of the epidemic and the downturn of the industry, real estate companies began to frequently expose debt defaults, and more and more real estate companies experienced liquidity crises. The downturn in the industry, policy restrictions and the increase in the risk of real estate companies themselves have made it more difficult for real estate companies to raise funds in the capital market, so the financing scale of real estate enterprises has decreased like a cliff, and has remained relatively sluggish for a long time.

Since November 2022, the financing policy of real estate enterprises has ushered in a turn, and the direction of relief has changed from the previous "rescue projects" to "the coexistence of rescue projects and enterprises". On November 8, 2022, the National Association of Financial Market Institutional Investors (NAFMII) announced on its official website that it would continue to promote and expand bond financing support tools for private enterprises, and on November 12, the People's Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) jointly issued the Notice on Doing a Good Job in Supporting the Stable and Healthy Development of the Real Estate Market ("Finance 16"), which comprehensively supports the stable and healthy development of the real estate market from both the supply and demand ends, and provides improved support for the operational financing of real estate enterprises and the special financing of "guaranteed delivery of buildings". On November 28, the China Securities Regulatory Commission announced the "Five New Policies for Equity Financing Optimization" to help real estate companies open up equity financing channels. So far, the policies on credit, bonds, and equity financing have been loosened.

After entering 2023, the government will continue to frequently introduce supportive policies for the financing of real estate enterprises, and have supported domestic and foreign loans, bonds, additional allotments and IPOs of real estate enterprises. At the same time, it has also increased support for the revitalization of existing assets, including allowing funds to invest in stock housing and market-oriented rental housing projects, and encouraging real estate enterprises to issue asset-backed securities such as CMBS and ABS. Although policies are frequently issued, due to the difficulty of policy implementation and the lack of market confidence, the overall financing of real estate enterprises is still relatively sluggish. According to incomplete statistics, the cumulative total financing of 80 typical real estate companies in 2023 will be 575.228 billion yuan, a year-on-year decrease of 30.38%;

2. The government requires banks to focus on supporting non-state-owned real estate enterprises, and bank-enterprise cooperation has increased significantly since November (some omitted)

On October 31, 2023, the Central Financial Work Conference proposed to meet the reasonable financing needs of real estate enterprises under different ownership systems without discrimination, and the government has repeatedly emphasized this on many occasions, and the financing needs of private real estate enterprises have received more attention. As the financial regulatory authorities put forward the "three not less than" at the symposium of financial institutions held on November 17, including: "1) the growth rate of real estate loans of each bank shall not be lower than the average growth rate of real estate loans in the banking industry; 2) the growth rate of corporate loans to non-state-owned real estate enterprises shall not be lower than the growth rate of real estate of the Bank; 3) the growth rate of personal mortgages of non-state-owned real estate enterprises shall not be lower than the growth rate of mortgages of the Bank." "Commercial banks' support for private real estate enterprises and mixed-ownership real estate enterprises has begun to increase significantly.

According to incomplete statistics, since November 21, at least 12 commercial banks have communicated with a number of real estate companies in the form of symposiums or one-on-one visits to support the reasonable financing needs of these real estate companies. On January 16, Ping An Bank included 41 real estate companies in the list of available financing support, including not only 28 central state-owned enterprises such as Poly, China Overseas and China Resources, and three mixed-ownership enterprises such as Vanke, Greentown and Gemdale, but also 10 private real estate enterprises such as Longfor, Binjiang and Midea Real Estate. In the future, more banks may follow suit, benefiting more real estate companies. It is worth noting that Country Garden, as an insurance real estate company, also appeared in the discussion list of Industrial and Commercial Bank of China, Guangfa Bank and Everbright Bank, which is a good thing for some insurance real estate companies.

At the end of 2022, banks will provide centralized credit to real estate enterprises

It has not effectively improved the financing of real estate enterprises

1. After the "16 Articles", banks will provide centralized credit, but it is difficult to land (omitted)

2. At the beginning of 2023, the scale of loans to real estate enterprises will rebound briefly, and the loan inflow of private real estate enterprises will shrink for a long time (some omitted)

Judging from the incremental scale of domestic loans for real estate investment in each month since 2020 announced by the National Bureau of Statistics, the months after 2020 have basically been in a slow downward trend, and the incremental scale of loans in a single month has begun to accelerate after entering 2022, reaching only 103.7 billion yuan in November, a new low since 2020. After the introduction of the "16 Articles", under the incentive of the policy, there has been a certain increase in real estate investment loans since December 2022, but this rebound only lasted until April 2023, and the increment of real estate investment loans in each month since then has returned to a downturn, and even only 93.9 billion yuan in August, falling below 100 billion yuan for the first time in recent years.

The big six banks are cautious about public real estate lending

The net increase in the first half of the year was about 250 billion

1. The scale of real estate loans of the six major banks exceeded 4 trillion yuan, accounting for 3.9% (some omitted)

From the perspective of the six major commercial banks (including Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Postal Savings Bank of China, and Bank of Communications), the scale of real estate loans[1] of the six major banks has maintained positive growth over the years, but the growth rate has declined, falling from 17% in 2020 to below 10%.

In addition, the growth rate of real estate loans of the six major banks exceeded the growth rate of total loans in 2020, but the growth rate has been lower than the growth rate of total loans since 2021. Although a series of policy support such as the "Three Arrows" were introduced at the end of 2022, and the six major banks also concentrated on extending credit to real estate enterprises, from the first half of 2023, it increased by 6.5% from the beginning of the year, which is still lower than the growth rate of total loans of 9.21%. As of the first half of 2023, the total loans of the six major banks to the real estate industry were 4,089.9 billion yuan, a net increase of 249.5 billion yuan compared with the beginning of the year.

As the growth rate of real estate loans is much lower than that of total loans, the proportion of real estate loans in total loans of the six major banks has also continued to shrink. In 2020, the proportion of real estate loans of the six major banks could reach 4.27%, and in the first half of 2023, it has gradually decreased to 3.9%. It can be seen that although the balance of real estate loans can still maintain positive growth, whether it is from the proportion or from the slowdown in growth, it can be seen that the six major banks tend to be cautious about real estate loans, and this phenomenon has not changed significantly in the first half of 2023.

2. The non-performing loan ratio of the real estate industry reached 5.02%, much higher than that of other industries (omitted)

3. The growth rate of the overall net profit attributable to the parent company fell to 2.58%, and the net interest margin continued to narrow (omitted)

Maintain strict supervision under the market-based mechanism

In the future, it may focus on three major projects

In the short term, the current risks in the real estate industry are still in the process of being cleared, and major banks are still cautious about real estate loans.

For example, in view of the real estate risk situation, Hu Gang, risk director of China CITIC Bank, said at the 2023 semi-annual results conference that the current corporate situation has the following six characteristics: 1. Adopt a white list for access and be approved by the head office; 2. In terms of regional distribution, the balance of first-tier and second-tier cities accounts for 90%; 3. From the perspective of guarantees, 95% of the loans have collateral, 98% of the collateral is in the first- and second-tier cities, the Yangtze River Delta and the Pearl River Delta region, and 5% of the credit loans are concentrated in the top real estate enterprises; The value coverage of public real estate is relatively high, reaching 2:1; 5. Sufficient provisions, with the current provision coverage ratio in the real estate sector at 7.31 percent, an increase of 1.2 percentage points from the beginning of the year; 6. Relatively strict management of real estate development loans.

Although since November 2023, the intensive holding of bank-enterprise forums in various places has been regarded by the market as an important measure for the banking industry to implement the central financial work conference and the financial institution symposium jointly held by the three departments, judging from the financial reports of the six major banks in the first half of the year, the current non-performing loan ratio of real estate business is still much higher than that of other industries, and it is expected that the banking industry will still have strict regulatory requirements for increasing the provision of public real estate loans.

At present, banks issue loans mainly on the basis of the value of the collateral. As disclosed in ICBC's annual report, it will determine the amount and type of collateral to be obtained based on the credit risk assessment of the counterparty. When applying for loan collateral against pledge, priority is given to collateral with relatively stable value and strong liquidity, and collateral that is not easy to realize, difficult to go through registration formalities or has large price fluctuations is generally not accepted. As a result, some insolvent real estate companies, or those with fewer mortgage targets, are unlikely to obtain bank loans under the market-oriented mechanism.

Although there is also market news in November 2023, it may be possible to "allow unsecured working capital loans to real estate companies, and real estate companies do not need to provide land and other collateral". However, judging from the statements of subsequent regulators, whether there is high-quality collateral is still crucial. On January 12, 2024, the Ministry of Housing and Urban-Rural Development and the State Administration of Financial Supervision and Administration issued the Notice on the Establishment of a Coordination Mechanism for Urban Real Estate Financing, which emphasizes that "the coordination mechanism proposes a list of real estate projects that can be given financing support in accordance with the development and construction of real estate projects, the qualifications, credit, finance, etc., and in accordance with the principle of fairness and justice, and pushes it to financial institutions within the administrative region." At the same time, for real estate development enterprises and projects with major violations of laws and regulations, evasion of financial debts and other problems, financial institutions should be reminded to prudently carry out credit. ”

In addition, Ge Haijiao, Secretary of the Party Committee and Chairman of Bank of China, said in an interview on December 6, 2023 that it is necessary to "adhere to the principles of marketization and rule of law, and maintain the stable and orderly financing of real estate enterprises under the premise of controllable risks and compliance with laws and regulations". On January 24, 2024, the General Office of the People's Bank of China and the General Office of the State Administration of Financial Supervision jointly issued the Notice on the Management of Operational Property Loans, reiterating that commercial banks should carry out operational property loan business in accordance with the principles of marketization and rule of law. For real estate development enterprises with standardized operation and good development prospects, on the basis of controllable risks and sustainable business, national commercial banks may also issue operating property loans to repay the relevant loans and open market bonds in the real estate field of the enterprise and its group holding company (including consolidated subsidiaries), in addition to issuing operating property loans for the operating capital needs related to the property itself, loans formed by the replacement of construction and purchase of properties, and shareholder loans. Commercial real estate includes, but is not limited to, commercial complexes, shopping malls, business centers, office buildings, hotels, cultural and tourism real estate projects, etc., excluding commercial housing and rental housing. In principle, the loan amount of operating property shall not exceed 70% of the appraised value of the loaned property.

It should be noted that in order to adhere to marketization and rule of law, it is inevitable for commercial banks to carry out risk management and control in specific practice, and considering the possible bad debt rate of high-risk loans in the real estate industry, it is expected that banks will remain relatively cautious about such loans.

In addition, on January 2, 2024, the central bank disclosed the resumption of PSL injection of 350 billion yuan, and the industry generally believes that the resumption of PSL will mainly be invested in the "three major projects". On January 5, 2024, the People's Bank of China (PBOC) and the State Administration of the Financial Regulatory Commission (CFRC) issued the "Opinions on Financial Support for the Development of the Housing Rental Market", in which the "group purchase" clause has attracted widespread attention in the market. It can be predicted that the focus of work in 2024 is to maintain the steady growth of existing loans, with the purpose of cooperating with the work related to "ensuring the delivery of buildings", and the incremental funds may be more invested in the "three major projects" to guide the industry to achieve transformation. Relevant real estate enterprises, especially private real estate enterprises, should do a good job of enterprise development planning in advance and take the initiative to transform to meet the new development situation of the industry.

★ For the full version of the topic, please consult: 021-60867863 Manager ★ Wu

Catalogue financial support has accelerated its implementation, and the analysis of bank loan trends for real estate enterprises has continued to be sluggish, and the government has supported the improvement of the financing environment for non-state-owned real estate enterprises

1. In 2023, the financing of real estate enterprises will continue to deteriorate, and it will continue to concentrate on central state-owned enterprises

2. The government requires banks to focus on supporting non-state-owned real estate enterprises, and bank-enterprise cooperation has increased significantly since November

2. At the end of 2022, banks granted centralized credit to real estate enterprises, which did not effectively improve the financing of real estate enterprises

1. After the "16 Articles", banks will concentrate on credit, but it is difficult to land

2. At the beginning of 2023, the scale of loans to real estate enterprises rebounded briefly, and the loan inflow of private real estate enterprises shrank for a long time

The three and six major banks have a cautious attitude towards public real estate loans, with a net increase of about 250 billion yuan in the first half of the year

1. The scale of real estate loans of the six major banks exceeded 4 trillion yuan, accounting for 3.9%

2. The non-performing loan ratio of the real estate industry reached 5.02%, much higher than that of other industries

3. The growth rate of the overall net profit attributable to the parent company fell to 2.58%, and the net interest margin continued to narrow

Fourth, under the market-oriented mechanism, strict supervision will be maintained, and the future may be dominated by three major projects

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