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UPDATE 2-China Sept bank lending tops forecast, corporate loans jump

* Sept new loans 1.9 trln yuan vs f’cast 1.7 trln yuan

* Sept M2 money supply +10.9% y/y, vs f’cast of +10.4%

* Sept outstanding TSF growth quickens to 13.5% from 13.3% in August (Adds comments from central bank and analysts)

BEIJING, Oct 14 (Reuters) - China’s new bank loans grew more than expected in September fuelled by a jump in corporate loans as the economy continued to recover from its coronavirus-induced slump.

The country’s economic outlook has turned more optimistic on aggressive government stimulus, with recent data pointing to a steady improvement from the COVID-19 health crisis.

Lenders issued 1.9 trillion yuan ($282.3 billion) in new yuan loans, data from the People’s Bank of China showed on Wednesday, up 48.4% from August and exceeding analysts’ expectations.

That pushed bank lending in the first nine months of this year to 16.26 trillion yuan, beating a previous peak of 13.63 trillion yuan in the first three quarters of 2019.

Analysts polled by Reuters had predicted new loans would rise to 1.7 trillion yuan from 1.28 trillion yuan the previous month.

Household loans, mostly mortgages, rose to 960.7 billion yuan from 841.5 billion yuan in August, while corporate loans jumped to 945.8 billion yuan from 579.7 billion yuan, according to Reuters calculations based on the data.

The strong appetite for corporate loans is in line with recent data showing robust import and export growth in September.

While the central bank stepped up policy support earlier this year after widespread travel restrictions choked economic activity, it has more recently held off on further easing.

The authorities should allow the macro-leverage ratio to rise temporarily due to efforts to boost credit support to the economy hit by the pandemic, Ruan Jianhong, an official with the PBOC, told a news conference.

China’s third-quarter GDP growth is expected to improve from the previous quarter, said Ruan, which could create better conditions for maintaining a reasonable leverage ratio.

STABLE POLICY

PBOC Governor Yi Gang wrote in an article last week that China will maintain “normal” monetary policy for as long as possible, and promote a reasonable increase in household savings and incomes.

“Because of the ongoing growth recovery but still strong headwinds, we expect Beijing to maintain its “wait-and-see” policy approach through the remainder of this year by neither easing further nor tightening,” analysts with Nomura said.

Broad M2 money supply in September grew 10.9% from a year earlier, topping analysts’ estimates of 10.4%.

Outstanding yuan loans grew 13%, unchanged from the gain in August. Analysts had expected 12.9% growth.

Most China watchers prefer to focus on the annual growth figures, which are a better guide to underlying trends in credit creation given that net issuance figures are highly seasonal.

Annual growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, quickened to 13.5% in September from 13.3% in the preceding month.

In September, TSF fell to 3.48 trillion yuan from 3.58 trillion yuan in August. Analysts polled by Reuters had expected 3.15 trillion yuan.

Julian Evans-Pritchard, Capital Economics’ senior China economist, said he expects credit growth to remain strong in the near term although quantitative controls on bank lending are being tightened.

“But with improving sentiment boosting bond and equity issuance among private firms, lending should remain strong enough to keep growth in outstanding credit rising until the turn of the year.” ($1 = 6.7313 Chinese yuan) (Editing by Jacqueline Wong)

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