OCBC, Asia’s leading financial services group, has revealed plans to launch a yuan-denominated mortgage service in its Chongqing branch by the third quarter this year, according to a Global Times report.
Hu Linhua, General Manager of Consumer Financial Services at OCBC China, said the Chongqing branch will be the third OCBC branch to provide yuan mortgages, after its Chengdu and Shanghai branches started offering yuan mortgages three years ago.
“With the increased reserve ratio rate, Chinese banks are tightening their belts. It’s a good moment for foreign banks to grab a piece of the yuan mortgage pie,” Citic Securities banking analyst She Minhua told Global Times.
However, experts believe that foreign banks’ lack of property developer clients and their limited deposit incomes may curb their growth in the area.
“As far as housing mortgages are concerned, foreign banks can’t compete with domestic banks,” noted Xue Jianxiong, Department Director of China Real Estate Information Corp.
“Chinese banks usually offer better rates, and have far higher yuan deposits than foreign banks.”
In 2006, the China Banking Regulatory Commission ordered all foreign banks to downscale their loan to deposit ratios to under 75 percent, by the end of 2011.
As of November 2010, however, only six of the 40 foreign-funded corporate banks operating in China had done so.
“Foreign banks don’t attract many yuan deposits as they are short on branches and clients,” said Guo Jiajie, Loan Manager at Standard Chartered.
Another significant obstacle to foreign banks is that they are banned by regulations from lending to those who wish to obtain a loan from the Housing Provident Fund, a collective state-supervised fund to aid first-time home buyers.
“This is very important for first-time local buyers, hence the role of foreign banks in the local housing loan market is relatively marginal,” Mr. Hu noted.
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