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DEBT

3 big Chinese banks to issue 63.5b yuan in bonds on same day

PUBLISHED : Wednesday, 13 August, 2014, 10:10am
UPDATED : Thursday, 14 August, 2014, 12:50am

Three of China's biggest banks will issue a total of 63.5 billion yuan (HK$80 billion) in second-tier bonds tomorrow as the mainland banking sector recapitalises in the face of increasing economic risk.

Agricultural Bank of China, the mainland's fourth-largest bank by assets and outstanding loans, will issue 30 billion yuan in 10-year bonds, the first tranche of a total of 50 billion yuan approved by the government late last month, according to mainland media.

Issuing fixedincome bonds [is] fairly reasonable and not unexpected
ERIN LEE, ANALYST, YUANTA SECURITIES

China Construction Bank, the mainland's second-biggest bank, plans to issue 20 billion yuan in 15-year bonds, and unlisted policy bank Export-Import Bank of China will issue 13.5 billion yuan in second-tier 10-year bonds, the reports said.

China Construction Bank issued US$5 billion in dollar-denominated 10-year Basel-III bonds on Wednesday at a yield of 300 basis points over US treasuries, according to a term sheet seen by the South China Morning Post.

On Tuesday, Bank of China completed an issuance of 30 billion yuan in 10-year tier-two bonds at a yield of 5.8 per cent, according to Chinese media.

The flurry of debt issuances this week is likely a coincidence, analysts said.

" When it comes to raising capital from the market, it's always at the government's direction," said Richard Cao, a banks analyst at Guotai Junan International in Shenzhen. "But I don't think they chose this time on purpose."

Bank of China and Industrial and Commercial Bank of China issued 50 billion yuan in bonds last week.

"Considering that in the first half of 2014, the [non-performing loan ratio] in the China banking sector has already surged to 1.08 per cent and the NPL balance is likely to increase for at least another two to three quarters, we deem issuing fixed-income bonds to enlarge the capital base of the Big Four to be fairly reasonable and not unexpected," said Erin Lee, an analyst at Yuanta Securities in Shanghai.

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