Not too rosy for China banks, but investors bullish

Hong Kong

CHINA's banks, already saddled with mounting bad debt, face the risk of sagging profit growth after an interest-rate cut slashed their margins on loans - but some investors are getting more optimistic, not less, about the outlook for the industry's shares.

Victoria Mio, chief investment officer for China at Robeco Hong Kong, whose parent company oversees about 237 billion euros (S$382 billion), said last Friday that bank stocks are very attractive because they are priced at levels that assume an economic "hard landing". Hours later, the People's Bank of China (PBOC) cut the one-year lending rate by 0.4 percentage point and the one-year deposit rate by 0.25 percentage point. Afterwards, Ms Mio said sustained monetary easing may drive an economic rebound and a jump in banks' share prices. She is "more positive" on the stocks.