Tianfeng2025 Bank annual strategy: Credit disbursement outlook

Tianfeng released a research report stating that the "main theme" of social credit issuance in 2024 is "squeezing out excess liquidity", with a decline in credit growth in most industries. It is expected that new RMB loans in 2025 will amount to 17.37 trillion yuan, with an increase of about 0.5 trillion yuan less than the previous year, and a growth rate maintained at 6.5-7%. The pace of credit issuance in each quarter is generally similar to 2024, with the loan increment ratio in the four quarters approximately 5:2:2:1. Tianfeng's main points are as follows: The "main theme" of social credit issuance is "squeezing out excess liquidity". From a total perspective, it is forecasted that the total new RMB loans for the year will be 17.8 trillion yuan, a decrease of 5 trillion yuan from 2023, with a growth rate of 7.5%, a decrease of 3.1 percentage points from 2023. In terms of pace, the central bank called for smooth credit issuance at the beginning of the year, but as the "squeezing out excess liquidity" continued after the Lunar New Year and led to a decline, it passively raised the proportion of Q1. It is expected that Q1 credit increment will account for around 50%, similar to 2023, and that the credit increment ratio for the four quarters of the year will be 53%, 21%, 15%, 10%. In terms of structure, pure loans (excluding bill financing and non-bank loans) have shown relatively weak growth since the second quarter, with bill financing accounting for approximately 34% of the increment, a significant increase from previous years. By industry, credit growth in most industries has declined. Specific characteristics are as follows: Firstly, under the background of credit "squeezing out excess liquidity" and rectification of "manual interest subsidy", credit issuance in the manufacturing industry has significantly contracted. As a key sector, with previous policies such as reloans and financial support supplemented by "manual interest subsidy" operations, it may lead to issues of idle funds. Since 2024, the rate of long-term loans in the manufacturing industry has decreased by nearly 17 percentage points to 14.8% as of the end of September, significantly showing the effect of "squeezing out excess liquidity". Secondly, credit to government and policy-related institutions has shown a clear downward trend due to the impact of debt restructuring. With local government bond swaps leading to direct replacement of some existing government and policy-related loans, and regulatory efforts to control new government investment projects, traditional urban investment infrastructure projects have been affected. Based on data from listed banks, the growth rate of infrastructure loans in the first half of 2024 was approximately 13.97%, a significant decrease of 3.89 percentage points from the end of 2023. Thirdly, there is marginal improvement in real estate loans to corporates. Since 2024, regulatory authorities have introduced several supportive tools and measures for the real estate market, precisely supporting real estate project financing to facilitate the completion and handover of buildings. According to Deputy Director Xiao Yuanqi, by the end of 2024, the credit scale of "white-listed" projects is expected to exceed 4 trillion yuan. Data shows that in the first three quarters of 2024, the scale of new real estate development loans was 910 billion yuan, an increase of 430 billion yuan year-on-year. Regionally, the differentiation of credit resources has improved As of the end of October, the average credit growth in economically developed regions such as the Yangtze River Delta, Pearl River Delta, and the Sichuan-Chongqing economic circle was approximately 8.80%, a decrease of 3.80 percentage points from the annual growth rate in 2023. In contrast, as of October 2024, the average credit growth in the northeastern regions of Heilongjiang and Jilin was 4.87%, 3.94 percentage points lower than that of economically developed regions during the same period, but a decrease of 0.88 percentage points from the annual growth rate in 2023, significantly smaller than that of economically developed regions. This indicates that in the past few years, the regional differentiation of credit resources in China has been significant, with economically developed regions becoming concentrated areas of credit resources, possibly leading to some credit supply-demand conflicts. With relatively weaker financing demand in the real economy and the background of credit "squeezing out excess liquidity", the decline in credit resources in economically developed regions is relatively larger. It is expected that the credit growth in 2025 will further decline to below 7% Regulatory oversight of credit scale has weakened. Looking back at the official statements from regulatory authorities in recent years, it can be divided into two stages: the first stage (2021-2023) saw higher regulatory requirements for credit growth, emphasizing the "stability of total credit growth". The second stage (2024-present) emphasizes abandoning the "obsession with scale" and maintaining balanced credit growth. The decline in loan interest rates is slower than the Loan Prime Rate (LPR), significantly compressing the arbitrage space between deposits and loans. In 2024, the 1-year and 5-year LPR were reduced by 35 basis points and 60 basis points respectively, while the average weighted interest rate on loans to the public only decreased by 24 basis points, marking the first time since 2020 that the reduction rate was lower than the LPR. This reflects an improvement in the credit supply-demand imbalance, and the downward momentum in interest rates may alleviate. Deposit rates have benefited from rectification of manual interest subsidies, deposit rate cuts, and bank duration reductions, with the potential for a further and significant downward trend in interest rates, significantly shrinking the arbitrage space between deposits and loans, and speculative loan volume is expected to be curbed. The manufacturing sector continues to face the challenge of "squeezing out excess liquidity". Firstly, the current utilization rate of manufacturing capacity is low (75.2%, at a 22.41% low point since 2016), and export orders may continue to shrink due to external factors. Considering the narrowing arbitrage space, the concentration of some existing loans coming due in 2025, and other factors, the performance of manufacturing sector credit may continue to weaken. Debt restructuring has a negative impact on government and policy-related loans. Looking at historical data, the three debt restructuring actions since 2015 have led to a decline in the growth rate of bank loans to government and policy-related institutions. Considering that 2.8 trillion yuan in debt restructuring is planned for 2025, preliminary estimates suggest that the net growth rate of bank loans to government and policy-related institutions will be approximately 8.75% in 2025, a decrease of 5.22% from 2024. Credit issuance by rural commercial banks is relatively weak. On the one hand, rural commercial banks increased their net purchases of 30-year ultra-long bonds in 2024. On the other hand, since the fourth quarter, rural commercial bank loans have shown clear signs of decline. Currently, the demand for financing in the real economy is still relatively weak, with a significant need for rural commercial banks to raise funds through bond issuance, reflecting significant pressures on their credit assets. It is expected that the situation in 2025 will continue in the aforementioned manner. In summary, it is expected that new RMB loans in 2025 will amount to 17.37 trillion yuan, an increase of about 0.5 trillion yuan less than the previous year, with a growth rate maintained at 6.5-7%. The pace of credit issuance in each quarter will be generally similar to 2024, with the four quarters...The proportion of the incremental loan amount is approximately 5:2:2:1.Risk warning: The above predictions are based on subjective assumptions and may deviate from reality; macroeconomic fluctuations, weak social credit demand, and significant pressure on bank interest spreads.