China CITIC Bank （CNCB） attended our Access China 2018 conference inBeijing today; we list the key takeaways below:
Loans
Loan demand is expected to be stronger than in 2017. The bank will scale uplending exposure to high-quality corporates; meanwhile, credit card and personalconsumption loans will remain major drivers on the retail banking side. Regardingloan pricing, largely two-thirds of loans were priced above the benchmark rateand this portion has increased.
Deposits
Management expects deposit growth to rebound in 2018 as 1） part of the fundsin off balance sheet WMPs might flow back to deposits; and 2） it turned moreaggressive on supply chain financing development, helping to attract depositsfrom corporate clients’ upstream/downstream customers.
Asset allocation strategy
CNCB contracted RMB450bn-worth of assets in 9M17, including: 1） RMB250bnlow-efficiency assets; 2） RMB150bn interbank WMPs; and 3） RMB40bn NSCAnon-standard credit assets）。 Management indicated the asset adjustment iscurrently almost complete, and it expects the asset base to see mild yoy growthin 2018. The main driver is the loan business.
Regulations
The document with the greatest impact in 2018 will be the asset managementguideline, which is pending for the final version to be released. Managementindicated that if investment in NSCA is restricted, the solution for banks’ WMPswould be 1） transferring NSCA to Non-NSCA; and 2） shifting credit demand backonto the balance sheet loan book. CNCB’s WMP balance is currently c.RMB1.3tr,among which off balance sheet WMPs are RMB910bn. NSCA accounted forc.30% of total WMPs. If NSCA is excluded from qualified investment, WMPinvestment’s credit rating requirement in bonds will gradually be lowered down,and the equity investment portion might be enlarged, aiming at maintaining yield.
Asset quality
Overall asset quality has trended better. But concerns remain on the existingcorporate loan book.