Bank of Nanjing Seeks to Raise 20 Billion Yuan for Capital Supplementation via Convertible Bonds

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Municipal lender Bank of Nanjing has just kicked off the issuance of over USD$3 billion in convertible bonds.

Bank of Nanjing launched its issue of 20 billion yuan (approx. $3.13 billion) in convertible bonds (Nanyin Convertible Bonds) (南银转债) on 15 June via online channels.

According to Bank of Nanjing all proceeds raised from the issue will be used to support the future operational development of the bank, and raise its capital adequacy ratio in accordance with the core tier-1 capital requirements for banks.

The issue is the fourth convertible bond issue since the start of the year, following in the wake of other regional banks including Bank of Shanghai, Bank of Hangzhou and Bank of Suzhou. The strong interest generated by these convertible bond issues has made analysts highly optimistic about the Bank of Nanjing issue.

The current share price for Bank of Nanjing is also higher than the price implied by the convertible bonds, standing at 10.19 yuan per share as compared to 10.1 yuan for the convertible bonds.

Bank of Nanjing is a leading regional bank in eastern China, with 88% of its operating revenues derived from the Jiangsu province region.

In the first quarter of 2021 Bank of Nanjing posted 4.099 billion yuan in net profits attributable to the parent company, for a YoY rise of 9.30%.

As of the end of 2020 the company’s total assets were in excess of 1.5 trillion yuan, for an increase of 12.93% compared to the end of the previous year.

Several other regional banks in China have unveiled plans to make convertible bond issues in the near-term, including Bank of Chongqing (13 billion yuan), Bank of Chengdu (8 billion yuan) and Industrial Bank Co., (50 billion yuan).

Domestic analysts point out that Chinese banks are pursuing issues of convertible bonds in order to supplement their core tier-1 capital levels, as regulators push them to provide greater support to the real economy while also imposing stricter capital adequacy requirements.

Zhou Guannan (周冠男) from Huachuang Securities said that there are currently 13 outstanding convertible bonds issued by banks, with a total balance of approximately 200 billion yuan.

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