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<Research>G Sachs: If CN Home Prices Drop 15% in Next 2 Yrs, CN Bank System Expected to Generate RMB900B Mortgage NPLs
Recommend 29 Positive 36 Negative 12 |
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Goldman Sachs released a research report reassessing the impact of China's real estate risks on the Chinese banking industry. Based on the forecast by its China real estate team that China's home prices will decline by about 15% in 2026-2027, the potential mortgage non-performing loan (NPL) ratio is estimated to reach 2.4% by 2027, with covered banks and uncovered banks forecasted at 2.1% and 3.4%, respectively. Based on the baseline forecast of a 15% drop in home prices, Goldman Sachs estimated that the banking system may generate approx. RMB900 billion in mortgage NPL and RMB1.1 trillion in non-performing real estate loans between 2025 and 2027. However, the broker believed that Chinese banks have the capacity to absorb relevant losses using existing provisions during 2025-2027, avoiding a capital shortfall situation. It is expected that banks can continue to declare dividends, with earnings anticipated to be negatively impacted by about 9%. Goldman Sachs' forecast for pre-provision operating profit (PPOP) growth in 2026 and 2027 remains largely unchanged. Therefore, Goldman Sachs preferred large banks such as BANK OF CHINA (03988.HK) and CCB (00939.HK), with both rated at Buy, and selected quality regional banks with improved asset quality, such as BANK OF NINGBO (002142.SZ). AASTOCKS Financial News Website: www.aastocks.com |
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