UPDATE 1-Bank of E.Asia plans over 3 bln yuan bond in HK

(Adds company announcement, banker comments)

HONG KONG, June 29 (Reuters) - Bank of East Asia (0023.HK) said on Monday its China unit aimed to sell more than 3 billion yuan ($439 million) of bonds, becoming the second foreign bank to sell yuan-denominated bonds in Hong Kong.

BEA (China) said in a statement it planned to offer at least 1 billion yuan of bonds, with a coupon rate of 2.8 percent per annum, for subscription from Tuesday to July 17, but Chairman David Li later said at a news conference the bank aimed to increase the issue size to over 3 billion yuan.

Li declined to comment on media reports the bank would sell 1 billion yuan of bonds to retail investors and 3 billion yuan to institutional investors.

The bond coupon is attractive to retail investors relative to the Hong Kong dollar saving rate of almost zero and the interest rate of 0.7-0.8 percent on yuan deposits, dealers said.

BEA (China) is also interested in issuing renminbi (RMB) bonds in China to tap the large pool of renminbi savings, Li told reporters.

"We aim to be among the first batch of banks to issue RMB bonds in China," he added.

Bank of East Asia and its bigger rival HSBC (0005.HK) HSBL.S became the first foreign lenders to win approval in May to issue yuan bonds in Hong Kong under China's aim to increase acceptance of its currency in the region.

Last Thursday, HSBC launched a 1 billion yuan, two-year floating rate note at a spread of 38 basis points over the three-month Shanghai interbank offered rate (SHIBOR), targeting institutional investors. [ID:nLP441973]

HSBC and Standard Chartered (2888.HK) (STAN.L) said earlier this month they were preparing to become the fist foreign firms to issue yuan bonds in China, after Beijing said in May it would support issuance by locally incorporated overseas lenders.

Foreign banks are eager to tap the yuan bond market for local currency to expand their China business as they have to rely on the more costly interbank market to fund their needs, economists said.

It would also take them years to develop their deposit base in China, they said.

Bank of China (Hong Kong) and Bank of East Asia (Hong Kong) are joint lead managers and book runners of the BEA China deal. (Reporting by Donny Kwok and Alison Leung, editing by Will Waterman) ($1=6.833 YUAN)