One China Bank Is Making Capital More Expensive for Many Lenders
- Bank of Jinzhou bond’s roller coaster ride a reminder of risks
- Some concern of smaller Chinese banks not calling debt: Nomura
A Bank of Jinzhou branch in Beijing, China, in 2017.
Photographer: Lang tian/Imaginechina via AP Images
Just two years ago, a little-known Chinese lender could raise capital from global investors at a yield of 5.5%, only 1 percentage point more than the debt of the nation’s leading retail bank, Postal Savings Bank of China Co.
But that all changed in June, when investors grew concerned about the outlook of the firm, Bank of Jinzhou Co. Yields on its so-called Additional Tier 1 notes blew out to over 21% after its auditors resigned citing inconsistencies in its loans, before coming back down to 11.4% this week, according to Bloomberg-compiled prices. Loss-absorbing securities from similar issuers, used to fulfill capital requirements, have also come under pressure.