Shanghai banks are pleading to the government to loosen its hold on housing loans to individuals as the profitable segment shriveled by over 80 percent last year compared with 2004.

According to official statistics released early this week, housing loans issued by Shanghai banks rose by 19.94 billion yuan (2.49 billion dollars), 52.9 billion yuan (6.61 billion dollars) or 83.6 percent less than 2004.

In contrast, during 2000 to 2004, as housing prices kept rising, housing loans to individuals nearly quintupled in Shanghai.

But any ups and downs in the real estate credit business would upset mainland banks as the segment accounted for almost 50 percent of their credit business.

"When business drops sharply, we will not let go any good client as a matter of rigid policies," said a banking official.

Banks from overseas have taken the opportunity to nibble on the market. The real estate credit business rose 14.4 percent of their total business volume last year.

At an annual meeting of the Shanghai banking regulatory administration early this year, officials started talking about excluding real estate loans from the range covered by macro-control measures adopted last year to cool down irrational real estate investment and prevent the sector from bubbling.

Receiving the message, industry insiders expect banks to further relax policies on the down payment level and preferential interest rates.

Such moves have already been taken in the metropolis. People who buy a second house can enjoy an interest rate of 5.508 percent for over a five-year lending period, lower than the government-required 6.12 percent.

But banking experts caution that Chinese banks lobbying for favorable government policies does not translate into stable profits, while expanding business scope and improving services do.

Official data show that Chinese banks count on differences of deposit and credit interest rates to take in 80 percent of their profits, while foreign banks see 50 percent of their returns from intermediary services such as individual asset management.

Source: Xinhua