By Pan Yue

Mainland lenders are becoming more selective, bankers say

They point to a recent loan for China Vanke, a Rmb4.15 billion ($656 million) facility, which will be used to acquire 20 shopping malls in China from Singaporean real estate company CapitaLand. DBS of Singapore and Maybank of Malaysia are leading the trade. But when Vanke Real Estate (Hong Kong) Co sealed a dual-currency loan of around $720 million in December 2017, Bank of China and Bank of Communications were the mandated lead arrangers alongside DBS, HSBC and UOB, according to Dealogic.

Bankers say the trend started even earlier. Last March, Chinese tech firm Tencent sealed a $4.65 billion five-year deal in which only four Chinese banks participated — Bank of China, Bank of Communications, China Construction Bank and China Development Bank. In June 2016, eight Chinese banks had joined in a $4.44 billion five-year loan for Tencent.

“They are not as aggressive as before, as liquidity onshore has tightened and costs of funding go up,” says a head of loan syndications in Hong Kong. “This does have a spillover effect offshore, so they are less active than before.” So far this year, only two Chinese banks, Bank of China and China Development Bank, are ranked in the top 10 mandated lead arrangers for credited loans in Asia ex-Japan, according to Dealogic. 


In comparison, five Chinese banks were in the top 10 MLAs during the same period last year. Mainland lenders are becoming more selective, bankers say. As a result, some tightly priced sectors, such as real estate, are struggling to attract Chinese lenders. For instance, Yue Xiu Enterprises, a Chinese real estate company, sealed a three-year borrowing in April with only two Chinese lenders, Bank of Communications and Bank of East Asia, while its three-year loan in 2016 attracted six Chinese banks, Dealogic data shows. 

Instead, technology credits, which have been strongly supported by the country’s government, are emerging as favourites.“For example, a telecommunications company is also having problems raising funding because the price is tight,” says a loans origination banker at a European firm. “Chinese banks are now focusing on the next layer of technology names.”

The lending activity of Chinese banks is also hindered by the government’s deleveraging policy, bankers say. The Chinese government wants to tackle leverage in the banking system. With fewer commitments from Chinese banks, the syndication process is getting harder. “It’s not easy to do deals now,” adds the loans origination banker. “The first signs are there of Chinese banks pulling back slowly. We have to run twice as hard to do deals.”

But a banker at a Chinese firm says it is, for the most part, business as usual. “This slowdown is quite normal because the US has raised interest rates. There’s less demand for loans from clients, but we will still do deals to meet their demand.”