Chinese Cook Books? Part II
We are in such a good mood that rather than sit on this info for a week, your getting next weeks splash, 7 days early. Enjoy... that is if you don't have any investments in Chinese banks...
We have previously gone on record regarding fraudulent Chinese book keeping in Chinese Cook Books.
Here is the index containing most of our China missives. Therein you will find the Chinese Banking Fraud, Western Naivety & Greed series which gives a detail background on the situation in Chinese banking.
Bank of China, China Construction Bank, Agricultural Bank of China and Industrial & Commercial Bank of China, are the nation's "big four" state- owned banks.
Bank of China, is seeking about $9.9 billion in an initial share sale this month, making it the mother of all banking IPO's.
Bank of China (Hong Kong) in 2002 scrapped plans to list shares in New York after its parent, Bank of China, paid fines to U.S. and Chinese regulators to settle fraud allegations.
China Construction first sold shares in Hong Kong in October last year and Industrial & Commercial plans an IPO of about $12 billion, which would be the world's largest in six years. Agricultural Bank also plans an initial share sale.
The four banks have about $358 billion of bad loans, almost three times higher than official figures, Ernst & Young said in a report Wednesday.
China's total bad loans amount to $911 billion, the most in the world, the report said. That is almost double an estimated $480 billion in 2002 and exceeds the country's foreign reserves of $875 billion.
E&Y says its new higher estimate of total liabilities is a result of better information, a tide of potential new NPLs due to rapid loan growth in recent years and the addition of sour loans in bodies such as rural credit co-operatives.
The problem is that the bad debt disposal companies have resolved only about a third of the loans taken off the books of the big banks.
The NPL's (non performing loans) are written off the books of the bank, then trasferred to a "special" bad debt holding company.
The Big Four transfered, as of December, US$330 billion in bad loans to special purpose asset management firms in exchange for government-backed bonds.
China's four bad loan managers - Cinda, Orient, Great Wall and Huarong - still have US$230 billion in bad loans to dispose of - almost 70 percent of their original mandate, Ernst & Young said.
The managers' bad loan auctions now draw a quarter to a half as many investors as previously because of sparse disclosure of loan information. Almost 30% of the bad loan porfolio is in real estate.
Report co-author Jack Rodman, a partner in Ernst & Young's Beijing office, said he expects more bad loans to emerge in the coming years from the overheated property market.
The timing of the E&Y report was especially aggravating for the PBoC, coming just before the launch of a crucial roadshow to promote the May 18th $9.9bn overseas initial public offering by Bank of China.
Subsequently E&Y has RETRACTED the report with a statement claiming the findings to be "erroneous". I can hear the Church Lady now: "Isn't that extra special? Isn't that convenient??"
Foreign investors have sunk billions of dollars into Chinese lending institutions through recent public offerings.
Bank of America, Citigroup, J.P. MorganChase, Merrill Lynch, Morgan Stanley and others have invested billions of dollars in the Chinese banking sector.
They probably know what they're doing. Right? We stand on our previous observation from Chinese Banking Fraud Part V:
"1,500 years ago, the Chinese not only invented accounting, they then invented quadruple accounting; a true set for limited internal use, another for the government, one for the investors and then one for their wives.
We are suspicious that mustard keen western MBAs, whose sights are fixed on 1.3 billion consumers and their own near term bonuses, rather than the $750 billion worth of bad debts in the system, can see through these multiple fictions."
and we have one thing to add.... its a disaster waiting to happen, CAVEAT EMPTOR.
The Standard: Auditors Hit Big Four
IHT: Regulators Warn
Financial Times: Beijing Blasts E&Y Report
We have previously gone on record regarding fraudulent Chinese book keeping in Chinese Cook Books.
Here is the index containing most of our China missives. Therein you will find the Chinese Banking Fraud, Western Naivety & Greed series which gives a detail background on the situation in Chinese banking.
Bank of China, China Construction Bank, Agricultural Bank of China and Industrial & Commercial Bank of China, are the nation's "big four" state- owned banks.
Bank of China, is seeking about $9.9 billion in an initial share sale this month, making it the mother of all banking IPO's.
Bank of China (Hong Kong) in 2002 scrapped plans to list shares in New York after its parent, Bank of China, paid fines to U.S. and Chinese regulators to settle fraud allegations.
China Construction first sold shares in Hong Kong in October last year and Industrial & Commercial plans an IPO of about $12 billion, which would be the world's largest in six years. Agricultural Bank also plans an initial share sale.
The four banks have about $358 billion of bad loans, almost three times higher than official figures, Ernst & Young said in a report Wednesday.
China's total bad loans amount to $911 billion, the most in the world, the report said. That is almost double an estimated $480 billion in 2002 and exceeds the country's foreign reserves of $875 billion.
E&Y says its new higher estimate of total liabilities is a result of better information, a tide of potential new NPLs due to rapid loan growth in recent years and the addition of sour loans in bodies such as rural credit co-operatives.
The problem is that the bad debt disposal companies have resolved only about a third of the loans taken off the books of the big banks.
The NPL's (non performing loans) are written off the books of the bank, then trasferred to a "special" bad debt holding company.
The Big Four transfered, as of December, US$330 billion in bad loans to special purpose asset management firms in exchange for government-backed bonds.
China's four bad loan managers - Cinda, Orient, Great Wall and Huarong - still have US$230 billion in bad loans to dispose of - almost 70 percent of their original mandate, Ernst & Young said.
The managers' bad loan auctions now draw a quarter to a half as many investors as previously because of sparse disclosure of loan information. Almost 30% of the bad loan porfolio is in real estate.
Report co-author Jack Rodman, a partner in Ernst & Young's Beijing office, said he expects more bad loans to emerge in the coming years from the overheated property market.
The timing of the E&Y report was especially aggravating for the PBoC, coming just before the launch of a crucial roadshow to promote the May 18th $9.9bn overseas initial public offering by Bank of China.
Subsequently E&Y has RETRACTED the report with a statement claiming the findings to be "erroneous". I can hear the Church Lady now: "Isn't that extra special? Isn't that convenient??"
Foreign investors have sunk billions of dollars into Chinese lending institutions through recent public offerings.
Bank of America, Citigroup, J.P. MorganChase, Merrill Lynch, Morgan Stanley and others have invested billions of dollars in the Chinese banking sector.
They probably know what they're doing. Right? We stand on our previous observation from Chinese Banking Fraud Part V:
"1,500 years ago, the Chinese not only invented accounting, they then invented quadruple accounting; a true set for limited internal use, another for the government, one for the investors and then one for their wives.
We are suspicious that mustard keen western MBAs, whose sights are fixed on 1.3 billion consumers and their own near term bonuses, rather than the $750 billion worth of bad debts in the system, can see through these multiple fictions."
and we have one thing to add.... its a disaster waiting to happen, CAVEAT EMPTOR.
The Standard: Auditors Hit Big Four
IHT: Regulators Warn
Financial Times: Beijing Blasts E&Y Report
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