With the issuance of 50 billion yuan of sustainable bonds by ABC today, the number of banks issuing sustainable bonds has reached 6 since the beginning of 2022, and the issuance scale of sustainable bonds has reached 87 billion yuan. Compared with the same period of the previous year, the number and scale of banks issuing sustainable bonds have increased.
“Banks are ‘active’ in issuing perpetual bonds. In addition to the great pressure on some banks to supplement capital, it is also to further consolidate capital.” Insiders told the financial associated press that after the bank’s capital is fully replenished, it can not only improve the bank’s ability to resist risks and meet the requirements of supervision, but also enhance the bank’s ability to further increase credit and support the real economy.
the first bank perpetual bonds hit after the festival, and the issuance scale increased significantly during the year
Today, ABC issued 50 billion yuan of perpetual bonds, which is also the first perpetual bond issued by commercial banks after the Spring Festival. So far, since 2022, the scale of perpetual bonds issued by banks has reached 87 billion yuan, a sharp increase of more than 18 times year-on-year compared with the total issuance scale of 4.5 billion yuan by the three banks in the same period of last year.
China Everbright Bank Company Limited Co.Ltd(601818) financial market analyst Zhou Maohua said that the issuance of perpetual bonds at the beginning of the year was “positive”, mainly due to the pressure of some banks to supplement capital deposits. At the same time, the market liquidity was abundant at the beginning of the year, and the cost of bank bond issuance and financing was relatively low. In addition, China continues to strengthen the disposal of non-performing assets and prevent potential risks, which also pushes up the demand for bank capital supplement. Wind shows that the average coupon rate of perpetual bonds issued by banks this year is 4.12%, compared with 4.8% in the same period last year.
The financial Associated Press reporter found that the year-on-year surge in the issuance scale of bank perpetual bonds this year was mainly due to the participation of large banks. ABC and Postal Savings Bank Of China Co.Ltd(601658) as large state-owned banks and systemically important banks, have become the “big head” of the issuance scale of sustainable bonds this year. Except for Agricultural Bank of China, Postal Savings Bank Of China Co.Ltd(601658) issued 30 billion yuan of perpetual bonds on January 14, while there was no big bank in the same period of last year.
Comparatively speaking, the issuance scale of small and medium-sized banks is small. During the year, four small and medium-sized banks issued perpetual bonds, with an issuance scale of no more than 3 billion yuan. Among them, the issuance scale of Mintai bank and laishang bank is 1 billion yuan, and the issuance scale of Xiamen International Bank and Bank Of Suzhou Co.Ltd(002966) are 2 billion yuan and 3 billion yuan respectively.
“Perpetual bonds are an important capital supplement tool for commercial banks. The purpose of issuance is to meet the regulatory requirements for the capital adequacy ratio of commercial banks.” A banker pointed out that from the perspective of the types of issuers, bank perpetual bonds show the characteristics of relatively more issuance by small and medium-sized banks and relatively larger issuance scale of large state-owned banks and joint-stock banks.
perpetual bonds are sought after, and small and medium-sized banks have high demands for capital supplement
As a capital supplement tool, perpetual bonds are undoubtedly favored by banks. According to the data, in 2019 and 2020, A-share listed banks issued 490 billion yuan and 557.5 billion yuan of perpetual bonds respectively, accounting for 32.22% and 48.7% of the funds raised by capital supplement instruments in that year. In 2021, the scale of perpetual bonds issued by A-share banks also exceeded 500 billion yuan.
“Perpetual bonds are both equity and debt. They do not specify the maturity time, the issuer can decide whether to delay the payment of interest (delay is not a breach of contract), and the issuer has no compulsory redemption obligation. That is, they can replace shares with bonds. Compared with other Tier-1 capital supplement tools, perpetual bonds have the advantages that the issuer is not restricted by listing, the approval time is short, and write down clauses can be designed.” An insider of a city commercial bank told the financial associated press that, therefore, perpetual bonds have become an important tool for commercial banks to supplement capital.
Under the impact of the epidemic since 2021, the regulators have emphasized the real economy and the endogenous capital supplement of banks is insufficient. However, commercial banks have actively supplemented capital through various channels, and the capital pressure has been alleviated. According to the latest data released by the CBRC, at the end of the fourth quarter of 2021, the capital adequacy ratio of commercial banks (excluding foreign bank branches) was 15.13%, an increase of 0.33 percentage points over the end of the previous quarter. The tier one capital adequacy ratio was 12.35%, up 0.23 percentage points from the end of the previous quarter. The core tier 1 capital adequacy ratio was 10.78%, up 0.12 percentage points from the end of the previous quarter.
“Under regulatory pressure, in order to better supplement capital, the future supply of secondary capital bonds and bank perpetual bonds of commercial banks is relatively rigid.” As for the capital replenishment of banks in 2022, China Industrial Securities Co.Ltd(601377) the research report points out that, on the one hand, under the regulatory provisions of systemically important banks, including large state-owned banks, joint-stock banks and other large banks have urgent capital replenishment needs; On the other hand, small and medium-sized banks have few channels to supplement capital, and the current level of capital adequacy ratio is relatively low. There are also demands to supplement bank capital through secondary capital bonds and sustainable bonds.
“In recent years, the diversification trend of bank capital replenishment tools and market participants is obvious. It is expected that more banks will choose diversified capital replenishment tools according to their own conditions.” Zhou Maohua said.
