Evergrande's lenders weigh up loan losses, roll over credit

BEIJING • One of China Evergrande Group's main lenders has made provisions for losses on a portion of its loans to the embattled property developer, while some creditors are planning to give it more time to repay, four bank executives told Reuters.

The Chinese banks' measures show how financial institutions in the world's second-largest economy are bracing themselves for a possible collapse of Evergrande.

The developer epitomised China's freewheeling era of borrowing and building, with nearly US$305 billion (S$412 billion) in liabilities across loans, bonds, so-called trust products and money owed to contractors and suppliers, among others.

Agricultural Bank of China (AgBank), the country's No. 3 lender by assets, has made some loan loss provisions for part of its exposure to Evergrande, one of the executives said, without giving details.

China Minsheng Banking Corp and China Citic Bank, two other major Evergrande lenders, are prepared to roll over some of their near-term debt obligations, two separate sources said.

AgBank, Minsheng, Citic and Evergrande did not respond to requests for comment.

In general, Chinese banks' exposure to Evergrande has fallen in the past year, and most of their outstanding loans are collateralised or guaranteed by deposits, according to the four sources.

Minsheng, for example, has cut its loan exposure to Evergrande to 30 billion yuan (S$6.3 billion) from 40 billion yuan over the past 12 months, one of the sources said, adding that it also stopped offering new loans to the firm.

Last year, Evergrande reported total bank and other borrowings of 693.4 billion yuan - including loans granted by trust firms rather than banks, which analysts said accounted for the bigger portion - down from 782.3 billion yuan in 2019.

Evergrande's bank exposure is wide and a leaked 2020 document, written off as fabrication by the company but taken seriously by analysts, showed liabilities extending to more than 128 banks and over 121 non-banking institutions.

After that leaked document, the People's Bank of China (PBOC), the central bank, requested all main Evergrande lenders to review their loan exposure and assess relevant financial risks on a monthly basis, a source said.

The PBOC and the sector regulator, the China Banking and Insurance Regulatory Commission, did not respond to Reuters' requests for comment.

Meanwhile, Evergrande is due to pay US$83.5 million of interest on Thursday for its offshore March 2022 bond. It has another US$47.5 million interest payment due on Sept 29 for March 2024 notes.

The bonds would default if Evergrande fails to pay the interest within 30 days.

Regulators have not given any indication to Chinese lenders of a possible bailout of Evergrande, said a source at one of the main trust creditors.

REUTERS