(Reuters) -China plans to inject at least 400 billion yuan ($55.13 billion) into its biggest banks in coming months as part of a broader stimulus package to revive growth in the economy, Bloomberg News reported on Wednesday.
The first batch of banks include Agricultural Bank of China (AgBank) and Bank of Communications (BoCom), Bloomberg said, citing unidentified people familiar with the matter.
The plan, which could be completed as soon as the end of June, is subject to change and the amount for each bank is still being finalized.
The Ministry of Finance, the National Financial Regulatory Administration, AgBank and BoCom did not immediately reply to Reuters request for comment.
Chinese banks are being squeezed by sluggish credit demand and cuts to interest rates to support sputtering growth, along with a slew of bad loans compounded by a years-long property sector crisis.
The government pledged late last year to increase capital at the country’s six major banks, but did not give many details.
The capital injection plan aims to supplement core Tier 1 capital at the country’s six largest state-owned banks, including Industrial and Commercial Bank of China, AgBank, Bank of China, China Construction Bank, BoCom and Postal Savings Bank of China.
In total, China could raise 1 trillion yuan via special treasury bonds for capital injection into the large state banks, Reuters reported in October.
AgBank closed up 2.62% in Hong Kong, and BoCom ended 2.15% higher.
Supporting the group that has a combined $1 trillion market value, in what would be the first time that authorities have re-capitalised the Chinese banks since the global financial crisis, is a critical part of Beijing’s stimulus efforts.
Last October, China pledged to “significantly increase” debt to revive the economy, including measures that would help local governments tackle their debt problems, offer subsidies to people with low incomes, support the property market and replenish state banks’ capital, among other measures.
China also unveiled a 10 trillion yuan debt package to ease local government financing strains and stabilise economic growth.
China’s parliament, the National People’s Congress (NPC), will kick off its annual session on March 5. Markets and economists are watching for more stimulus measures to be unveiled during the session, expecting targeted measures on boosting consumption.
Top Chinese lenders have been struggling with falling net interest margins (NIM) and shrinking profits. The overall NIM for China’s commercial banks fell to a record low of 1.52% in the fourth quarter of last year, official data showed.
($1 = 7.2555 Chinese yuan)
(Reporting by Rajveer Singh Pardesi in Bengaluru and Ziyi Tang in Beijing; Editing by Kim Coghill and Shri Navaratnam)
