Chinese Banks Plan Over 96bn Yuan in Preferred Issuances Abroads

Chinese banks are increasingly turning to overseas capital markets to raise funds, with a slew of preferred stock issuances set to hit Hong Kong in rapid succession.

In just the past week five Hong Kong-listed Chinese-invested banks have revealed plans to issue preferred stock abroad, with the cumulative amount reaching 80.5 billion yuan.

Since December 2016 total of 7 Chinese banks, including Harbin Bank, Postal Savings Bank of China and China Merchants Bank, have revealed plans to issue preferred stock abroad for a total amount of roughly 96.5 billion yuan.

Hangzhou-headquartered China Zheshang Bank, for example, just finished issuance of 15 billion yuan in preferred stock via Hong Kong.

Reasons cited by analysts for Chinese banks to look abroad for funds include capital supplementation pressure, as well as supplementation using US dollar debt in order to expand access channels and increase overseas influence.

Another factor is an ongoing slide in the profitability of banks over the next year to year and a half, which will put further pressure upon bank capital.

China’s major state-owned banks were initially a driving force behind overseas issuances, with ICBC, BOC and CCB releasing over 109 billion yuan in preferred stock abroad from October 2014 to the end of 2015.

The commercial and small-to-medium sized banks have since followed their lead, with municipal bank Huishang issuing preferred stock abroad in November last year.

 

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