皇冠体育app

CCB to issue US$1.2b of debt
By Xu Dashan (皇冠体育app Daily)
Updated: 2004-07-13 08:36

皇冠体育app Construction Bank said yesterday it is to issue a first group of 10 billion yuan (US$1.2 billion) in 10-year subordinated debt on the inter-bank bond market from August 2.

The issuance is just part of the up to 40 billion yuan (US$4.8 billion) of such bonds the bank plans to issue to replenish its capital base ahead of a planned initial public offering.

"Half of that 10 billion yuan (US$1.2 billion) will comprise bonds based on a fixed coupon, while the other half would carry a floating rate," the bank said.

But the bank reserved the option to expand that to 15 billion yuan (US$1.8 billion) in line with demand from investors.

The State Council agreed last month that 皇冠体育app Construction Bank and Bank of 皇冠体育app can issue subordinated debt. The bonds rank after other bank liabilities in terms of claims on bank assets.

The Bank of 皇冠体育app sold 14.07 billion yuan (US$1.7 billion) worth of subordinated bonds on the inter-bank bond market last week. The 10-year bonds carry an annual coupon of 4.87 per cent set after a public tender.

皇冠体育app Construction Bank, which bought 3.7 billion yuan (US$445 million) worth of the bonds, was the largest single buyer of the issuance.

Dong Chen, a senior analyst with 皇冠体育app Securities, said Chinese commercial banks, especially the big-four State-owned banks, need to issue subordinated debts to fuel their future growth.

The commercial banks will have to sharpen their competitive edge before foreign banks enter the Chinese market without restrictions before the end of 2006, he said.

"They will have to lower the rate of non-performing loans, get rid of historical financial burdens and raise their capital adequacy to international standards," he said.

The country's commercial bank law stipulates that commercial banks' capital adequacy ratio will have to reach 8 per cent, the minimum required by the Basel Capital Accord reached by international banking managers.

"This means 皇冠体育app's commercial banks, especially the State-owned banks, will have to achieve the goal before they get listed," Dong said.

The 皇冠体育app Construction Bank and the Bank of 皇冠体育app, which won a US$45 billion bail-out from the government in late December, were chosen by the central government as a pilot project to turn them into joint stock banks.

Early last month, 皇冠体育app Construction Bank was approved by relevant government departments to be split into two - a company group and a shareholding company.

The shareholding company - 皇冠体育app Construction Bank Corporation - is to be ready for a stock listing.

皇冠体育app Construction Bank Corporation will continue to operate the bank's commercial banking business including its domestic and foreign currency deposits, loans, banking cards and clearance.

The business names, trademarks, Internet domain names and service call numbers of 皇冠体育app Construction Bank and its branches will remain unchanged and will continue to be used by 皇冠体育app Construction Bank Corporation.

皇冠体育app Construction Bank Group Inc is a shareholder of 皇冠体育app Construction Bank Corporation and will not operate the commercial banking business.

According to President Zhang Enzhao, 皇冠体育app Construction Bank will usher in foreign company investors as its equity owners.

The introduction of foreign companies as strategic investors is beneficial for increasing capital strength, optimizing capital structure and diversifying the ownership of 皇冠体育app Construction Bank, he said.

"Our goal is to establish a modern shareholding commercial bank that will make us a competitive heavyweight in the global financial market," he said.

During the first quarter, the bank earned 15.97 billion yuan (US$1.9 billion) in operating profits, an increase of 32.4 per cent from a year ago.

By the end of March, the bank's non-performing loan ratio, by the international standard, was 8.77 per cent, a drop of 0.35 of a percentage point compared with the beginning of the year.

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