Chinese banks' TSF reaches a record RMB 2.55t in March

Guess what caused the increase?

According to Barclays, March TSF was RMB 2.55tn, a rebound from RMB1.07tn in February when the one-week-long CNY holiday occurred and even slightly stronger than the RMB 2.54tn in January 2013.

Here's more from Barclays:

The growth was pushed by both new loans and non-bank financing. Compared with the figure for January, TSF was largely driven by the single month record-high trust loans (+RMB 436bn in March vs. +RMB 205bn in January) and corporate bonds issuance (+RMB 389bn in March vs. +RMB 220bn in January) despite the drop in growth in bank acceptances (+RMB 273bn in February vs. +RMB 581bn in January).

TSF reached RMB 6.16tn in 1Q13 (compared with RMB 3.89tn in 1Q12), new RMB loans of RMB 2.75tn only accounted for 45% of TSF, which slid from 63% in 1Q12. We expect corporate bond issuance to continue its upbeat growth this year, benefiting from the CBRC’s No. 8 document regulating non-standard credit assets (NSCA) of bank-originated wealth management products (WMP), where corporate bonds were classified as standard credit assets.

Strong new RMB loans driven by recovering demand from small and micro business post CNY holiday; softening MLT corporate loans: New RMB loans in March amounted to RMB 1.06tn (vs. RMB 620bn in Feb and RMB 1.07tn in Jan), in line with earlier media reports of RMB 1tn (click here for our previsous comment) and above market consensus of RMB 900bn.

The sequentially higher new loan growth was broadly based, but with particularly strong seasonal recovery in short-term retail loans (+RMB 211bn in Mar vs. a decline of RMB 17bn in Feb on CNY holiday effect), but we noted slightly weaker mid-to-long term corporate loans (+RMB 253bn in Mar vs. +RMB 283bn in Feb).

Comparing the March figure with January, the stronger increase in discounted bills (+RMB 118bn in Mar vs. -RMB 34 in Jan) was offset by weaker MLT new retail loans (+RMB 172bn in Mar vs. +RMB 268bn in Jan), giving a net-net similar new RMB loan amount.

Financing structure-wise, MLT new loans were largely stable at RMB 425bn while ST new loans saw a big jump to RMB 620bn in March after the CNY holiday. MLT new bonds ware RMB 347bn (vs. RMB 113bn in Feb and RMB 163bn in Jan). Discounted bills continued their recovery trend to record an increase of RMB 118bn (vs. RMB 18bn in Feb and -RMB 34bn in Jan).

Tremendous deposit growth seasonally driven by corporate side: March new deposits amounted to RMB 4.22tn (RMB 2.95tn in Mar-12), setthg another record growth rate on a single-month basis. Structure-wise, we see seasonal flow in corporate deposits (RMB 2.43tn in Mar-13 vs. RMB 1.76tn in Mar-12), stable strong retail deposits (RMB 1.18tn in Mar-13 vs. RMB 1.19tn in Mar-12) and some decline in fiscal deposits (-RMB 267bn in Mar-13 vs. –RMB 404bn in Mar-12).

We suspect the exceptional deposit growth in March could be partly benefited from: 1) softer WMP growth after regulatory tightening and 2) larger corporate financing access from non-bank sources (e.g. bond issuance and trust loans).

Money supply indicators M0, M1 and M2 at end-Feb 2013 were RMB 5.57tn, RMB 31.1tn and RMB 103.6tn, up 12.4%, 11.9% and 15.7% y/y, respectively, which was stronger than we expected.