Chinese bank shares drop due to worries about a rate cut on existing mortgages.

Shares in China’s banking sector drop on worries of mortgage rate reduction

The banking sector in China is facing a double blow as ⁢concerns over the⁤ property sector crisis and a slowing⁢ economy are compounded ​by a potential reduction in existing mortgage rates. This ⁣has led to a 0.5% drop in China’s benchmark banking sector index and a 0.13% ⁢decline ‌in Hong Kong’s ​Hang Seng Mainland Banks Index.

On a positive ⁢note, China’s CSI300 index has gained 0.3% ⁤and Hong Kong’s Hang Seng Mainland Properties Index ⁢has ‍risen by about 1%.

According to three sources familiar with the matter,​ some ‌Chinese state-owned banks‍ are planning to lower interest rates on‌ existing mortgages ‍in an effort to ⁣revive the ‌property sector. However, this reduction in mortgage​ rates⁣ is expected to⁢ further impact the ⁢profitability of the banking sector.

In their interim financial reports, three of China’s largest banks have already reported​ a contraction in their net interest margin (NIM) – a key measure of profitability – in⁣ the second ‍quarter of this year.

Vivian Xue, director of APAC Financial Institution at ‌Fitch Ratings, predicts that the revenue pressure​ on the banking sector will persist in the second half of this year and into 2024, due to narrowing NIM and‌ weak retail ‌loan demand.

(Reporting by Ziyi Tang ⁣and Ryan Woo;‌ Editing by Sumeet Chatterjee, Robert Birsel)

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