Industrial & Commercial Bank of China Ltd., the world’s biggest lender by market value, won approval to sell as much as 50 billion yuan ($7.9 billion) of subordinated bonds to bolster its capital.
The sale in China’s interbank bond market was approved by the China Banking Regulatory Commission and the People’s Bank of China, the Beijing-based lender said in a filing to the Hong Kong stock exchange yesterday.
China’s five biggest banks are seeking funding from the domestic and overseas bond markets to replenish capital as regulators tighten requirements to curb inflation and reduce the risk of defaults. Shares of the lenders, which raised $61.5 billion from equities last year, have lost an average 22 percent this year on concern that a record two-year credit boom may unravel and lead to rising bad debts.
The two-day sale of fixed-rate bonds will start today, comprising 10 billion yuan of 10-year bonds and 40 billion yuan of 15-year securities, according to a Dec. 26 statement posted on Chinabond, the nation’s biggest debt clearing house.
Banks have led returns in China’s bond market this year on signs of monetary policy easing, even as the risk of holding their debt doubled.
Finance company bonds, including China Construction Bank Corp., returned 7.9 percent, topping the 7.4 percent gain for utilities, according to Bank of America Merrill Lynch’s China Broad Market Index. The performance beat a loss of 0.2 percent for global financial notes, the data show. Contracts to protect Bank of China Ltd.’s debt from non-payment rose to 274 basis points from 121 on Jan. 1, prices from data provider CMA show.
Shareholders of ICBC approved plans to raise as much as 70 billion yuan by selling subordinated bonds through the end of June 30, 2012.