CHINA’S urging of stock purchases to support companies’ share prices is proving a boon for banks — because of the opportunity to finance the deals.

    Banks are diving in to what they see a low-risk opportunity for making money, according to Huatai Securities Co. Banks and their brokerage units are providing structured products — asset management plans — for funding major shareholders’ purchases of stock.

    “This is much safer and more lucrative when compared with traditional lending,” said Lin Bocheng, a Shanghai-based analyst at Huatai. “There’s almost no risk of it becoming a bad loan and the return can be about 7 percent to 8 percent, so every bank wants to get a piece of that.”

    The total amount of funding arranged through the products may amount to tens of billions of yuan, Lin estimated. The business is a small but welcome boost for banks when corporate demand for long-term loans is weak and soured credit is on the rise. Regulators’ support is an added attraction.

    The funding contrasts with banks’ reluctance to channel money to the nation’s smaller businesses as an economic slowdown adds to the risk of loans turning bad.

    As part of efforts to rescue a plummeting share market, officials banned the largest shareholders of publicly traded firms from selling stock and urged them to raise their stakes. They also told banks to do more stock-pledged lending to fund share buybacks.

    At least 1,300 major investors had boosted their holdings as of July 20 from July 8. (SD-Agencies)