Financial Services Association, April 26 (Reporter Gao Ping) Another bank has completed issuing secondary capital bonds. This evening, the Agricultural Bank announced that the bank recently completed issuing 60 billion yuan of secondary capital bonds. This is the fourth bank to complete the issuance of secondary capital bonds since April. According to Wind statistics, when no banks issued secondary capital bonds in March, the total issuance scale of banks since April has exceeded 140 billion yuan, which is more than the same period last year.

Industry insiders said that bank capital replenishment sources can be divided into two types. One is endogenous capital accumulated through self-profit; the other is through exogenous channels such as secondary capital bonds, perpetual bonds, and convertible bonds. When bank capital is fully replenished, it can not only enhance banks' ability to withstand risks and meet regulatory requirements, but also enhance banks' ability to further increase credit investment and support services to the real economy.

Since April, banks have issued a total of 144 billion yuan of second-tier capital bonds, far exceeding the same period last year

Specifically, out of the 60 billion yuan secondary capital bonds of the Agricultural Bank, the 5+5 year term was 30 billion yuan, with an issuance interest rate of 2.32%; the 10+5 year term was 30 billion yuan, with an issuance interest rate of 2.49%. According to information, the Agricultural Bank's current bond issuance mechanism has an additional issuance mechanism. Thanks to investor support, the 10+5 year variety was increased from 10 billion yuan to 30 billion yuan, with an increase of 20 billion yuan, maintaining the record for the largest increase in the interbank market.

“This issuance will help the Agricultural Bank to further raise the level of capital adequacy ratio, broaden medium- to long-term funding sources, promote the Agricultural Bank to make better use of its advantages, and show greater achievements in serving the 'Sannong' county area and real economic development.” The Agricultural Bank said so.

According to Wind statistics, prior to that, Bank of China, Bohai Bank, and Zheshang Bank also issued second-tier capital bonds in April. Among them, the Bank of China issued the same scale as the Agricultural Bank, at 60 billion yuan; Bohai Bank and Zheshang Bank were relatively less, 14 billion yuan and 10 billion yuan respectively.

Overall, since April, the scale of secondary capital bonds issued by banks up to now has surpassed that of the entire month of April last year. According to Wind statistics, the amount of secondary capital bonds issued by banks in April 2023 was 81.6 billion yuan. In addition to the banks mentioned above, Wind indicated that according to the arrangement, Bank of Communications, Bank of Hankou, Jiangsu Jiangnan Rural Commercial Bank, and Zhejiang Changshan Rural Commercial Bank will complete the issuance of secondary capital bonds in April. It is worth mentioning that in the long run, no banks issued second-tier capital bonds in March of this year.

The pace of issuance is affected by many factors. State-owned enterprises are the main players in issuing “Eryong Bonds”

In addition to secondary capital bonds, banks also “replenish blood” through various other methods, such as perpetual bonds. This evening, China CITIC Bank announced that it will issue 30 billion yuan of perpetual bonds on April 26. Statistics show that since April, 2 banks have issued a total of 60 billion yuan of perpetual bonds.

Perpetual bonds and secondary capital bonds are collectively known as “Eryong Bonds”. What factors affect the pace of issuance of “Eryong Bonds”? Liu Yu, a researcher at Guotai Junan, said that judging from historical data, the pace of issuing eryong bonds is mainly quantitatively influenced by changes in capital adequacy ratio and balance management system; this impact is somewhat prospective. At the same time, market interest rates are taken into account to adjust the pace of issuance, but this impact may often be delayed.

“Based on the stock debt situation, the maturity of 2024 long-term bonds was much higher than in the past few years, and increased in the second quarter, reaching its peak in the third quarter. In the context of increasing redemptions in the first three quarters, considering the pre-effect, the circulation volume is likely to be high in the first half of 2024, while the pressure on issuance after the third quarter was relatively reduced.” Liu Yu pointed out that in terms of issuers, since stock banks and state-owned banks were the most important perpetual debt redemptors in the second and third quarters, respectively, these two types of entities had the highest demand for renewal, at 80 billion yuan and 240 billion yuan, respectively.

Also, from the perspective of issuers, state-owned companies are the main issuers. According to Wind statistics, since this year, banks have issued a total of 334 billion yuan of second-tier capital bonds, with a total issuance scale of 300 billion yuan; issued 133 billion yuan of perpetual bonds, and the total issuance scale of major state-owned banks is 70 billion yuan.

“The first commercial bank secondary bond was issued in 2013, and the first perpetual bond was issued in 2019. Since then, the scale of commercial bank secondary perpetual bonds has increased year by year.” Guosheng Finance's research team pointed out that by the end of 2023, the size of commercial banks' second-tier capital bonds and perpetual bonds was $3.64 trillion and $2.36 trillion respectively, accounting for 7.9% and 5.1% of total credit bonds, respectively. The scale of perpetual bonds is mainly concentrated in major state-owned banks. Furthermore, the number of small and medium-sized banks issuing second-tier capital bonds is significantly higher than perpetual bonds. Taking agricultural and commercial bonds as an example, there are 161 agricultural and commercial banks that maintain second-tier capital bonds, while only 15 have perpetual bonds.