Sluggish new loans and deposits in China banks lower than consensus

It's a function of seasonality, however.

It has been noted that new loans data in China are lower than consensus yet in keeping with seasonal pattern.

According to a research note from CCB International, by the end of April, loans had achieved 14.1% YoY growth, with new loans amounting to RMB707.9b, much lower than the consensus estimate of RMB903b due to weak corporate short-term loans.

Despite coming in below the consensus estimate, the figure for new loans was in line with the level of new loans for the same period in previous years, namely RMB775b in April 2014 and RMB792b in April 2013.

Here's more from CCB International:

Off-balance-sheet lending still weak. Off-balance-sheet lending is still weak as new trust loans and non-discounted bank bills continue to shrink.

New entrusted loans remain low at RMB34b. We think the trend is likely to sustain as pressure builds to move off-balance-sheet lending onto the balance sheet.

Non-bank financial institutions a major contributor to deposits. Deposits achieved 9.7% YoY growth and increased by RMB871b in April 2015. This compares with shrinking deposits each April since 2012.

The improvement is likely the cause of deposits from non-bank financial institutions, which increased RMB1.03t. These deposits likely came from securities companies benefitting from the strong A-share market. Deposits from individuals and corporations shrunk QoQ due to seasonality.

LGFV debt swap plan made further progress. The MOF, PBoC and CBRC jointly issued Document 102, stipulating that (1) local government bonds could be recognized by the PBoC as collateral to for SLF, MLF and PSL, and (2) a significant number of local government bonds are to be issued directly to the creditors of local government debt.

We believe these arrangements will facilitate the implementation of the LGFV debt swap plan, which is negative to bank interest rate income but positive to their asset quality.