More about Chinese Banks

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These days the Chinese bank stocks are flying high. At the same time the competition also intensifies as the foreign bank are formally opening branches next Monday. The domestic players are raising fund through IPO: with the recent IPO of ICBC (601398.SS) and Bank of China (601988.SS); the new IPO of China Citic Bank, the “Haigui IPO” of Bank of Commincations (3328.HK) are on the horizon; some local commercial banks (used to be credit unions) are also preparing IPO, notably Bank of Nanjing, and Bank of Ningbo.

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Banks are definitely making money. I think the real estate is a big one from the consumer side (and business side too). The risk there is the slow down of the real estate market amid recent “clamp down” policies. The credit card business is also taking shape. I saw people promoting credit cards at the exit of metro (subway). In both cases if the consumer can not pay back the loan (mortage in the case of housing), the banks will take a hit. It’s amazing for me to see the “bad loan rate” for some Chinese banks (e.g., Xing Ye Bank) are under 2.7%. I remember years ago ICBC has bad loan rate more than 20%.

About the service, expect long lines in most banks. This will not change after the openings of foreign banks. Because the VIP account need CNY 1 m. On the other hand, there are lots of ATM machines in the branches, we can do simple things such as “deposit money” on the machine, without waiting inline.