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ICBC Stops Discounts On Mortgages For First-Home Purchases-Report

05/07/2012 | 06:01am US/Eastern

-- Industrial & Commercial Bank of China Ltd. tells branches to stop discounts on mortgages for first-home buyers, the People's Daily reports

-- ICBC is now offering benchmark rates for mortgages to first-time home buyers across the country

-- The bank's move comes as sales are gathering pace in some areas, hinting Beijing isn't likely to allow the market to become too exuberant

(Adds more details about home sales in recent months and other banks' mortgage policies in the final paragraph.)

Industrial & Commercial Bank of China Ltd. (1398.HK) has told its branches to stop offering discounts on mortgages for first-home buyers, the People's Daily reported Monday, citing staff of the country's largest bank by assets.

The report cited a staff member of ICBC's phone-banking service as saying his branch's 15% discount for such home purchases has been temporarily suspended.

The bank is now offering benchmark rates for mortgages to first-time home buyers across the country, the paper cited another staff member with knowledge of the situation as saying.

A spokesman for the bank said he wasn't aware of the change.

Home sales in some parts of China have been gathering pace following a sharp fall at the start of the year, with some first-time homebuyers reportedly saying last month it has become easier to secure a mortgage after the central bank loosened banks' reserve requirements twice since November. Still, ICBC's latest move may indicate the government is reluctant to allow the market to become too exuberant.

Analysts said ICBC's move may also reflect the bank's desire to protect its profitability by focusing less on first-time home buyers. Lenders are likely to face tighter profit margins this year as a result of the government's tight monetary policy.

Chinese banks have some leeway in adjusting mortgage rates according to their own risk-management criteria and location. Banks' headquarters typically don't have a uniform mortgage lending policy, leaving individual branches to set their own policies based on local conditions.

The government allows banks in China to offer discounts of up to 30% on loan rates to first-home buyers, but few of them have offered the maximum discount since the start of last year because of the country's crackdown on speculation in the property market and tighter credit controls.

In recent months, banks such as Bank of China Ltd. (3988.HK), Citibank (China) Co. and Hua Xia Bank Co. have offered 10% discounts on loans for such home buyers, while Agricultural Bank of China Ltd. (1288.HK) has offered a 5% discount. Such preferential mortgages for first-home buyers are aimed at boosting sales in response to calls from authorities to support this market segment in the face of high property prices, according to state media reports.

A Bank of China employee told Dow Jones Newswires the lender hasn't changed its discount policy.

Agricultural Bank of China spokesman Yao Chunlei said the bank's mortgage policy remains unchanged, while a spokesman for China Construction Bank Corp. (0939.HK) declined to comment on whether it will follow ICBC's lead by cutting discounts.

Newspaper website: http://www.people.com.cn

-By China Bureau, Dow Jones Newswires; 8621 6120-1200; djnews.shanghai@dowjones.com

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