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Chinese banks post some of the biggest drop in CET1 ratios in Asia Pacific in Q2

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Chinese banks post some of the biggest drop in CET1 ratios in Asia Pacific in Q2

China's biggest banks reported some of the largest quarter-over-quarter decline in fully loaded common equity Tier 1 ratios in the second quarter, according to a survey by S&P Global Market Intelligence.

In the three months ended June 30, among 27 Asia-Pacific banks in the sample, 18 reported lower CET1 ratios compared to the previous quarter, 13 of which are Chinese lenders.

China Merchants Bank Co. Ltd. posted the biggest dip in the ratio, down 50 bps from the end of the first quarter. Postal Savings Bank of China Co. Ltd. and Bank of Communications Co. Ltd. are also among the Chinese lenders posting quarter-over-quarter drop of the ratios by more than 30 bps.

As of end-June, China CITIC Bank Corp. Ltd. and Ping An Bank Co. Ltd. posted the lowest CET1 ratios of 8.58% and 8.89%, respectively, in the sample.

CET1 ratio measures common stock held by a bank, mostly common shares and retained earnings, as a percentage of its risk-weighted assets. Banks in the region must have a fully loaded CET1 ratio of at least 7% from 2019 under Basel III conditions, comprising a minimum 4.5% CET1 ratio and a 2.5% capital conservation buffer. Certain banks might be susceptible to supplementary local capital buffer obligations.

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