Financial China

LGFV loans: the great disappearing act

  • Published 07 Apr 2011

How convinced should investors be by assurances that bank lending to local government finance vehicles (LGFVs) have come down significantly?

There is no doubt Chinese banks delivered cheerful 2010 results to investors, with net profits at the Industrial and Commercial Bank of China (ICBC) (1398:HKG, 601398:SHA) reaching Rmb 166bn ($25.4bn, £15.6bn, €17.7bn), up 28.4% year on year, China Construction Bank (CCB) (0939:HKG, 601939:SHA) reaching Rmb 134.8bn, up 26.4% year on year, Bank of China (BOC) (3988:HKG, 601988:SHA) reaching Rmb 104.4bn, up 28.5% year on year and Agricultural Bank of China (ABC) (1288:HKG, 601288:SHA) reaching Rmb 94.9bn, up 46%. Also, according to the China Banking Regulatory Commission (CBRC), total after-tax profit of China's banking industry in 2010 reached Rmb 899bn, up 34.5% year on year. Such strong growth numbers may continue in Q1 and Q2 this year as banks keep their net interest income (NII) robust despite the tighter credit environment (CC Mar 24 2011, Financial China).

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