BEIJING (Reuters) – Industrial and Commercial Bank of China announced that it will issue 30 billion yuan ($4.15 billion) worth of total loss-absorbing capacity (TLAC) bonds on May 15, marking the first issuance of such bonds by a Chinese bank.
China’s major state-owned lenders are under increasing pressure to raise capital, especially as demands grow to support the economy, property developers, and local government financing vehicles.
The world’s largest bank by assets stated that it will issue 20 billion yuan in a tranche of four-year bonds that can be redeemed at the end of three years, and 10 billion yuan in six-year bonds with conditional redemption at the end of five years.
These details were included in a bond prospectus released on the website of the Shanghai Clearing House on Saturday.
The proceeds from the issuance will be used to enhance the bank’s total loss-absorbing capacity, and the issue period will run from Wednesday to Friday.
TLAC bonds, which are not included in a bank’s capital base, can be written off or converted into common equities when the bank enters the disposal phase.
As designated global systemically important banks, five of China’s largest state-owned banks, including ICBC, are intensifying their efforts to comply with stricter global regulatory rules on capital buffers.
To address a capital shortfall, these five banks have announced plans this year to issue a total of 440 billion yuan in TLAC bonds. However, Fitch Ratings estimates that they will still have a TLAC shortfall of 1.6 trillion yuan by January 2025.
($1=7.2261 renminbi)
