| SINGAPORE/SHANGHAI, August 14
SINGAPORE/SHANGHAI, August 14 China's top five
banks will raise 128 billion yuan ($20.8 billion) in a two-week
bond offering spree following a year-long hiatus, as regulators
signal a willingness for lenders to aggressively tap
The country's bank regulator began phasing in new higher
capital adequacy requirements last year, in line with global
rules known as Basel III, and aggressive implementation of the
third Basel accord is a key element of China's plan to fortify
banks against risks from a slowing economy.
China Construction Bank Corp and
Agricultural Bank of China Ltd , the
country's second- and third-largest banks, respectively, have
announced plans to raise 50 billion yuan worth of Basel
III-compliant Tier 2 capital via domestic bond issues on Friday.
Bank of Communications Co Ltd , the
country's fifth-biggest lender, plans to raise 28 billion yuan
on Aug. 18.
The issues follow two large offerings last week, the first
from the country's top five banks since early 2013 and China's
transition to Basel III.
Industrial and Commercial Bank of China Ltd (ICBC)
and Bank of China , the
country's largest and fourth-largest lenders, together offered
50 billion yuan of bonds last week.
The flurry of offerings shows Chinese regulators have signed
off on the giant deals despite their potential drain on market
liquidity, and are comfortable with the new Basel III-compliant
bond structure, sources told IFR Asia, a Thomson Reuters
China's economy showed further signs of softening in July
despite a burst of government stimulus measures and banks have
tightened lending to risky areas such as the property sector.
The government embarked on a massive credit-fuelled economic
stimulus programme from 2008 to 2010 to pull the economy through
the global financial crisis. Many analysts expect a large
portion of bank loans extended during that time to turn sour.
The fundraising spree still leaves China's top lenders
lagging regional counterparts.
Asian banks (excluding Japan and Australia) have raised more
than $32 billion in Basel III compliant securities to date,
which includes $26 billion issued in 2014, in local and
international markets, according to Moody's data.
Steven Chan, a banking analyst at Maybank Kim Eng, said the
amount being raised was small viewed against the assets of
China's top lenders. "It's very small compared with the
trillions of assets," he said.
China's big state-owned banks have announced plans to raise
$43.5 billion in on- and off-shore Tier 2 capital by the end of
Agricultural Bank of China plans to sell 50 billion yuan of
Tier 2 securities, Bank of Communications is in for 40 billion
yuan and China Construction Bank for 60 billion yuan. ICBC is
eyeing a total of 60 billion yuan, while Bank of China will make
a play for the same.
All that makes for a total of 270 billion yuan in Basel III
compliant bonds that will hit the market - more than from any
other single country.
Lenders are issuing to replace old-style Tier 2 bonds that
are about to mature and hold yields down, Chan said.
"If you don't repay bondholders, the yield will increase
automatically, so the best way is to issue bonds at a similar or
lower rate to repay the earlier one."
A total of 93 billion yuan of subordinated bonds from
China's commercial banks will mature next year, according to
China Central Depository & Clearing, a state-owned clearing
house for onshore bonds.
($1 = 6.1609 Chinese yuan)
(Tu Lianting reports in SINGAPORE for IFR; Editing by Pete
Sweeney and Jacqueline Wong)