China banks' total social financing reaches record high of RMB15.8t

Loosening monetary conditions continue.

According to Barclays, new RMB deposits in December reached RMB 1.6tn mainly due to year-end fiscal fund disbursement, with total outstanding deposits reaching RMB 94.3tn at end-Dec, up 13.3% y/y.

Here's more from Barclays:

Lower-than-expected Dec new loans, but largely in line with the 2012 target of RMB 8tn.

Dec new RMB loans amounted to RMB 454bn (lower than the Bloomberg consensus of RMB 565bn), but total new RMB loans in 2012 reached RMB 8.2tn, 2% above the government’s 2012 target of RMB 8tn and pushing the outstanding loans at end-2012 to RMB 63tn,up 15% y/y.

In the breakdown, short-term corporate loans were the key driver of monthly new loans, which increased to RMB 448bn (vs. RMB 305bn in November), the highest monthly figure in 2012. The high short-term loan mix is generally seasonal for year-end.

However, the Dec new corporate loans was partially dragged down by 1) sequential decline on discounted bills which reduced RMB 189bn (vs. -RMB 37bn in November) likely due to the PBOC strengthened its control on discounted bills business since September, and 2) RMB 11bn decline on medium- to long-term corporate loans as a result of seasonally low loan growth towards year-end, in our view.

Dec new retail loans reached RMB 208bn (vs. RMB 241bn in November) which was evenly contributed by RMB 109bn (vs. RMB 89bn in November) new short-term loans and RMB 97bn (vs. RMB 152bn in November) new medium- to long-term loans.

Deposits grew as usual in year-end to support the liquidity

Dec new deposits amounted to RMB 1.6tn (vs. RMB 474bn in November), contributing the total new deposits in 2012 to RMB 10.8tn, up 19% y/y. Total outstanding deposits at end-2012 reached to RMB 91.7tn, up 13.3% y/y.

New retail deposits and corporate deposits increased by RMB 1.2tn (vs. RMB 252bn in November) and RMB 1.1tn (vs. RMB 326bn in November) respectively, leading the FY12 y/y growth rate of retail and corporate deposits to 16% and 7% respectively, in line with our forecast.

Meanwhile, fiscal deposits seasonally declined by RMB 1.2tn, likely on year-end government payments and transfers. Total fiscal deposit in 2012 dropped RMB 197bn (vs. -RMB 30bn in 2011), indicating government used more fiscal policy to support the liquidity and deposit growth.

Money supply indicators M0, M1 and M2 at end-2012 were RMB 5.5tn, RMB 30.9tn and RMB 97.4tn, up 7.7%, 6.2% and 13.8% y/y respectively.

Record-high TSF suggests loosening monetary conditions and intensifying financial disintermediation

Despite a m/m decline in new RMB loans, total social financing (TSF) reached RMB 1.6tn in December (vs. RMB 1.1tn in November), pushing the full-year TSF to a record-high of RMB 15.8tn, 13% higher than China’s stimulus year of 2009 and 2010 and indicating loosening monetary conditions continue.

The TSF was underpinned by non-bank credits in December. RMB loans accounted for 28% of the TSF, the lowest in the past few years. On the other hand, new entrusted loans and trust loans reached RMB 204bn (vs. RMB 122bn in November) and RMB 250bn (vs. RMB 200bn in November), both record highs. Bank acceptance and corporate bond also increased by RMB 257bn (vs. -RMB 50bn in November) and RMB 207bn (vs. RMB 182bn in November) respectively. This indicates that financial disintermediation is intensifying, in our view.

We expect that the strong growth of non-bank credits is likely to slightly decelerate in 1Q13, primarily due to: 1) regulator scrutiny on the distribution of investment products (see our comment: CBRC ordering banks to check sales of third-party financial products; a positive move to tighten loopholes, dated Dec 21, 2012) and further regulation on LGFVs’ fundraising methods (see our comment: Four regulators jointly issue circular on Dec 31 to regulate local government borrowing—will this slow down investments?, dated Jan 3, 2013) in late December, and 2) new loan quotas to stimulate bank credit financing at the beginning of each year.