高盛：中国银行业 测试“不可能三角（英文版）.pdf

4 July 2023 | 11:21PM HKT China Financial Services Testing the ‘Impossible Trinity’ Part I: Nine questions around local gov. debt We introduce the first report in our 3-part Te ting the ‘Impo ible Trinity’ series, Shuo Yang, Ph.D. +852-2978-0701 | shuo.yang@ which looks at the idea that banks cannot maintain a good balance of provisions, oldman Sachs (Asia) L.L.C. capital and dividends at the same time owing to squeezed earnings. In this report, we assume local gov. debt default risk will be limited as long as debt rollover is permitted and net balances continue to increase, and assess the potential multi-year margin loss of banks on the back of local gov. debt rollover due to lowering rates. We look at nine questions that we think will be top of mind for investors and group these questions under three broad themes. The first theme concerns the local gov. debt exposure on bank balance sheets, in terms of size, mix and distribution. We conclude non-covered banks with 48% local gov. debt to total assets (vs. 18% for covered banks) would face more challenges with potential tail risk. Inferring from this, we expect six large banks with larger balance sheets to step up and take on more local gov. debt. The second theme is bank earnings risk, due to margin loss on local gov. debt. We use a loss assumption of Rmb ~30tn (USD 4.5tn) gross addition of local gov. debt and a ~30bps effective rate decrease each year, with banking system ROE decreasing by ~100bps, and no