Chinese banks get room to grow

Following similar moves by their Australian parent banks, ANZ, Westpac, ASB and BNZ announced restrictions last month that will shut out non-resident borrowers. Photo / File

The decision by New Zealand's major banks to halt lending to foreign house buyers could provide a shot in the arm for Chinese banks looking to grow their operations in this country, says a banking expert.

Following similar moves by their Australian parent banks, ANZ, Westpac, ASB and BNZ announced restrictions last month that will shut out non-resident borrowers.

The risks involved with such lending were one of the main reasons for the change.

Massey University's David Tripe said the development was a potential opportunity for Industrial and Commercial Bank of China (ICBC), China Construction Bank and Bank of China, which have all established operations in New Zealand recently.

Those banks could continue lending to China-based borrowers, he said, but with less risk than their Australasian counterparts given their capabilities around carrying out due diligence in their home market.

Lloyd Cartwright, executive general manager of China Construction Bank New Zealand, said the bank was still lending to overseas borrowers, which he described as a "continuing opportunity".

"Primarily our mortgage book is high net worth Chinese," Cartwright said. "We are continuing to write loans into that sector."

Like Tripe, he said Chinese banks could conduct "robust due diligence" on China-based borrowers.

"We have a high level of underwriting standards - we don't do mortgages above 70 per cent LVR [loan-to-value ratio] for offshore borrowers," Cartwright said. "We have a number of other underwriting standards that mean we think our risk profile is probably better than what an equivalent Aussie [owned] bank's would be."

China Construction Bank New Zealand reported gross loans and advances of $307 million as at December 31, 2015, up from $3.9m a year earlier. That included $72m in residential mortgages.

ICBC, meanwhile, received a US$60m capital injection from its Chinese parent last week, which will allow it to extend a loan book that grew 343 per cent to $379.9m last year, its second full year of operations.

But the bank's chairman, Don Brash, said the cash injection wasn't a response to the lending restrictions on foreign borrowers imposed by New Zealand banks.

"We applied for this [capital] six months ago," Brash said, adding that the restrictions would benefit ICBC only to a "very small" extent. "Most of our lending is corporate and we do a bit of infrastructure lending as well."

Wee Li Cheong, of Bank of China New Zealand, said the bank continued to lend to foreign borrowers but mortgage lending was a small part of its business, with loans only extended to "ultra high net worth" clients.