A new report from S&P Global Ratings says that four of China’s big state-owned banks will fall short of international capital requirements by over 6 trillion yuan within several years’ time.
Industrial and Commercial Bank of China (ICBC), Bank of China (BOC), China Construction Bank (CCB) and Agricultural Bank of China) had a combined capital shortage of 2.25 trillion yuan (approx. $327.16 billion) in 2019, according to the report from S&P released on Wednesday.
S&P sees this figure rising to as high as 6.51 trillion yuan by 2024 due to the adverse economic impacts of the COVID-19 pandemic.
“The Big Four banks’ synchronisation with global loss-absorbing standards is a key topic for investors, because it influences capital structure, the cost of funding, and importantly, the mechanism for extraordinary support,” wrote S&P analyst Michael Huang in the report.
Chinese commercial banks posted a dismal performing in the first half of 2020 as a result of the impact of COVID-19, with net profits declining 9.4% YoY to one trillion yuan according to data from the China Banking and Insurance Regulatory Commission (CBIRC).