Credit Suisse analyst Sanjay Jain said in a report last week that he thinks that up to 12% of all of China’s outstanding loans may go bad and non-performing loans may likely account for all of the banks’ equity. Current NPL ratios hover at around 1% or the top Chinese banks.
Ops a daisy. As Temasek has major (and so far very profitable) stakes in two of China’s top four bank, Bank of China (4%) and Construction Bank of China (7%), predictions such as this (and Credit Suisse is not alone, just the latest and most pessimistic) should worry S’poreans.
As Temasek got the initial substantial stakes at bargain prices (courtesy of the Chinese government), selling part or all these stakes requires Chinese approval. At a time when the Chinese government is supporting the shares of the major four banks, such approval is unlikely.
Not another debacle like Shin, ABC Learning, Merrill Lynch or Barclays in the making?