Banks deny housing loan rout

BEIJING, July 9 -- Shenzhen banks Monday denied a widely circulated rumor that the city's commercial banks had more than 100 billion yuan (14.29 billion U.S. dollars) of bad loans in the property market, and said the bad loans accounted for only 0.67 percent of the total volume.

"It (the rumor) is ridiculous! Think about it -- the 100 billion yuan means nearly 50 percent of the home mortgage portfolio of Shenzhen banks were bad loans. That's absolutely impossible," yesterday's Shenzhen Economic Daily quoted a manager who is in charge in an unnamed commercial bank's mortgage division as saying.

The city's banks have a total of only 220 billion yuan in mortgage assets, the bank manager said. He refused to give his name.

However, he admitted that the bad loans had increased 11 million yuan in May compared to January, up 0.02 percent, the Daily said.

A blog claiming that Shenzhen banks had bad loans of 100 billion yuan widely circulated among Internet users last month. The blogger, identified only as "Fengyu," said he learnt from a source at the Shekou branch of a commercial bank that more than 1,000 clients of the branch had not paid their loans for three months, worth more than 1.5 billion yuan.

"Fengyu" reckoned that the bank had a 20 billion yuan bad loans in home mortgage citywide, and hence the amount was likely to surpass 100 billion yuan for all banks in the city.

The Nandu Weekly said in a recent report that some small property speculators suffered substantial losses after housing prices in the city fell for nine consecutive months since last October. Some of them could no longer afford the mortgage payment of several hundred thousand yuan a month, it said. Property prices have dropped about 36 percent compared to July last year.

The Daily quoted some bankers as saying that most non-speculating homebuyers wouldn't stop paying their mortgage unless they were honestly broke.

"Homebuyers will give up their apartments only when the losses they suffer from the price decreases far exceed the down payment they've paid," said Gao Haiyan, a research with the Shenzhen Academy of Social Sciences.

Most commercial banks in the city usually issue a notice to clients who fail to pay the mortgage for three months. They only take legal actions against those who fail to pay the mortgage for six consecutive months.

According to regulations issued by the People's Bank of China, loans that cannot be retrieved after necessary legal proceedings have been taken will be labeled bad loans.

(Source: Shenzhen Daily)