Bloomberg News

China Construction Bank to Sell 30 Billion Yuan of Bonds

October 31, 2011

(Updates with ICBC’s bond sale in the last paragraph.)

Oct. 31 (Bloomberg) -- China Construction Bank Corp., the world’s second-largest lender by market value, plans to sell 30 billion yuan ($4.7 billion) of subordinated bonds on the domestic market to replenish its capital.

The lender will sell 3 billion yuan of 10-year subordinated bonds and 27 billion yuan of 15-year subordinated bonds in three working days starting Nov. 3, according to a statement on the Chinese government bond clearing house website today. Construction Bank in August said it will sell as much as 80 billion yuan of subordinated notes by the end of August 2013.

China’s five biggest banks are seeking funding from the domestic and overseas bond markets as authorities order them to increase capital and set aside more cash as reserves to curb inflation and prepare for potential loan defaults. Shares of the lenders, which raised $61.5 billion from equities last year, have lost an average 18 percent this year on concern that a record two-year credit boom may unravel and increase bad debts.

Beijing-based Construction Bank fell 1.9 percent to HK$5.74 at 11:47 a.m. in Hong Kong trading. The benchmark Hang Seng Index lost 1.2 percent.

The bank said last week that third-quarter net income rose 16 percent to 46.2 billion yuan as lending and fee income climbed. The lender’s core capital adequacy ratio increased 0.17 percentage points from the end of last year to 10.57 percent, while the nonperforming loan ratio declined to 1.02 percent from 1.14 percent.

Industrial & Commercial Bank of China Ltd., the world’s biggest lender by market value, said Sept. 26 its board approved a plan to sell as much as 70 billion yuan of subordinated debt by the end of June 2012 to bolster capital.

--Editors: Nathaniel Espino, Russell Ward

To contact the reporter on this story: Stephanie Tong in Hong Kong at stong17@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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