China Merchants Bank is targeting domestic loan growth of just 11 per cent this year, down from 19 per cent last year, to adapt to the state's tightening monetary policy.
The Shenzhen-based lender, the mainland's sixth largest, expects total customer loans to reach 750 billion yuan (HK$823.95 billion) this year, compared with 673 billion yuan last year. Included in the category are corporate loans, retail loans and discounted bills.
Meanwhile, the increase in customer deposits is estimated to slow to 5.98 per cent from 21.94 per cent a year earlier, according to management.
'As we progress from a larger base and given the tightened monetary conditions, loan growth will be much lower,' said Qin Xiao, president of China Merchants Bank. 'Fluctuations in the capital market will also affect our fee-based business.'
The People's Bank of China is known to assign quarterly loan quotas to commercial lenders to better manage liquidity and curb inflation. Generally, the total loan amounts must not exceed the previous year's levels.
Mr Qin also said non-performing assets would increase this year, as the credit risk may loom large on some enterprises in the property sector as well as in industries that are polluting, consume a lot of energy or dependent on natural resources.
The bank's non-performing loan ratio improved from 2.12 per cent to 1.54 per cent last year, while its debt coverage ratio is more than 180 per cent, the best among listed mainland lenders.
The company stressed that it did not hold any securities backed by subprime mortgages and related derivatives in the United States, despite having on its portfolio foreign bonds with a value of about US$4 billion.
'These are all bonds issued by foreign governments and financial institutions with ratings of either AA or AAA,' Mr Qin said.
However, Merrill Lynch expects China Merchants Bank to experience a sharp rise in credit charges as the US economy slows and as credit markets deteriorate.
The brokerage expects its lower income fee growth will slow the bank's earnings for this year to just 20.63 billion yuan, an increase of 35.36 per cent compared with the 124 per cent growth recorded last year.
Separately, shares of Wing Lung Bank were suspended from trading yesterday on news that its controlling shareholders had appointed a number of investment banks to dispose of their stakes.
China Merchants Bank was said to be one of the potential buyers.