Riding the wind of rebirth

"For example, the long-term idle funds you just mentioned, and the 30 million for the satellite base, can be replenished with loans. These funds can be used for their designated purpose, which is convenient for you and reassuring for us. Once the funds are freed up, you can use them as you see fit. Isn't that great?"

What are the current loan interest rates?

"Currently, the benchmark interest rate for short-term loans is 9.72% for six months, 13.14% for medium- to long-term loans of one to three years, 14.94% for loans of three to five years, and 15.12% for loans of more than five years."

"If you borrow 10 million for a year, the interest will be 1.3 million. If you borrow 30 million, the interest will be 3.9 million. That's not a low interest rate."

“That applies to ordinary customers,” Liu Yushu said. “For high-quality corporate clients like the group and high-quality individual clients like you, our leaders said that if it’s an alternative loan like long-term accumulated funds, our loan interest rate can be lowered. For one-year loans, we can adjust it to 10.25%.”

"In addition, the agreed deposit rate between the group and you personally is about to expire. If you borrow money from us, we can raise the agreed deposit rate by 1.5 percentage points."

"Wait a minute..." Zhou Zhi felt his brain was starting to malfunction: "If you do this, won't your bank... lose money?"

The Clover Group and Zhou Zhi were major clients of Liu Yushu. The group's deposits in the company had long exceeded 2.5 billion yuan, while Zhou Zhi's personal funds were over 80 million yuan. The rest were transferred in and out of the securities market through third-party deposits via the Bank of China's Chengdu branch.

With billions of dollars in capital, a 5% increase translates to tens of millions. Theoretically, several hundred million dollars would need to be lent out to recoup those tens of millions.

"This shows the bank's sincerity in promoting development together with high-quality customers," Liu Yushu said with a smile.

"Sister Liu, tell me honestly, won't we be making a mistake by doing this?" Zhou Zhi was a little worried. No matter how you looked at it, this matter seemed to have the suspicion of... undermining the company.

"This is a special policy for a special period," Liu Yushu said with a smile. "If you're worried about taking too much advantage, you can borrow more!"

"You might not understand how our bank operates, Elbow. We're family, so I'll be frank with you. The non-performing loan ratio is linked to many of the bank's performance indicators, and the People's Bank of China's supervision is very strict. Different violations will be punished in different ways, and the most severe penalty can be a veto, which can lead to the immediate dismissal of the leader."

"For banks that effectively reduce high-risk indicators, the rewards are also very substantial. It's not just about improving the non-performing loan ratio; it also affects our bank's ranking among peers in the province, and even more so, our provincial branch's ranking within the national banking system."

"The rise in these two rankings will affect the annual performance bonuses within the industry, and even the promotion of leaders and senior executives at all levels. The sum of these benefits is something that you can't get even if you wanted to pay tens of millions of dollars normally."

"Without violating the rules, our leadership has required the entire bank to mobilize and do everything possible to reduce non-performing loans, laying a good foundation for future restructuring and listing. In addition to reducing non-performing loans through various means, we also need to explore the loan needs of high-quality customers like you, in order to improve our bank's loan structure."

"Of course, this isn't something to be forced. Ultimately, it's about providing better service to everyone." After Liu Yushu's explanation, Zhou Zhi finally understood. This was about finding ways to manipulate data within legal and compliant boundaries. Large clients can negotiate deposit interest rates with banks; this is called negotiated deposit rates, which falls under the authority of Liu Yushu's company's finance department.

Now, banks are linking loans to this authority, encouraging customers to take out loans while compensating them with interest rates on customer deposits. The bank's deposit volume remains unchanged, but the number of loans increases. The loan revenue is used to make up for the deposit losses. For the bank, this reduced revenue is negligible compared to the many benefits it gains, such as improved loan structure, reduced risk indicators, better performance evaluation, improved market ranking, and increased employee income.

Moreover, if the negotiations with the client go well, for example, the tens of millions acquired by Zhouzhi can be covered by a loan of several hundred million. Zhouzhi will not suffer any losses and will even gain a large amount of usable funds. The bank will also suffer no losses, and the benefits it gains will be considerable.

Of course, all of this is based on the premise that the hundreds of millions lent to Zhouzhi are high-quality loans that can be recovered on time and in full.

This is undoubtedly a speculative act, but in the absence of a fully perfect financial system, it is indeed a loophole that bank decision-makers can exploit. Compared to the current widespread phenomenon of inflated loans, lending to "need" high-quality customers is completely legal and compliant.

"Reducing the non-performing loan ratio in RMB and finding high-quality RMB loan customers are not a big problem for the old hands in the credit department. The main problem is the non-performing loan ratio in foreign currency."

"There aren't many clients in the province who have foreign currency business, and even fewer who can get loans. Our group is the best in this area, even better than your cousin's Jinan Group. So our leader wants to ask you to help us with foreign currency loans."

“I understand your difficulties now,” Zhou Zhi nodded. “Then, Sister Liu, how much do you think would be appropriate for us to borrow?”

"In US dollars, around 20 million would be quite good, enough to reduce our bank's non-performing foreign currency loan ratio to a safe range."

“Speaking of which, I do have an idea,” Zhou Zhi said. “How about this: we bring together the base and the post office, sit down and talk about how we can use US dollars to pay for the later stages of the Star Engine Project?”

"As for the project deposit, we apply to your bank as a loan and then deposit it with your bank. Do you think this is feasible?"

"Really? That's wonderful!" Liu Yushu was surprised that Zhou Zhi would give her such a big surprise. This was not only an expansion of the loan business, but also an expansion of the core business of her department!

"However, there will be a lot of work to be done, such as signing a four-party agreement, setting up special accounts for each party, and your bank will also need to assign someone to be responsible for the normal progress of this project. It involves currency conversion and foreign exchange rates, which may be quite complicated to implement."

"No matter how complicated it is, I think it can be overcome, or even given the green light," Liu Yushu said with a smile. "The fundamental reason is that the country urgently needs foreign exchange. I believe that research institutions like the base and the post and telecommunications institute have a great need for overseas equipment and urgently need foreign exchange that they can control independently. Therefore, I think everyone will reach a consensus on this plan!" (End of this chapter)