BEIJING (Reuters) – Industrial and Commercial Bank of China said it will issue 30 billion yuan ($4.15 billion) of total loss absorption capacity (TLAC) bonds on May 15, the first such bond issuance by a Chinese bank.
China’s largest state-owned lenders are facing growing pressure to raise capital, especially as demands grow to support the economy, property developers and local government funding mechanisms.
The world’s largest bank by assets said it will issue a 20 billion yuan tranche of four-year bonds that it can repay at the end of three years, and 10 billion yuan of six-year bonds with a conditional maturity at the end of five years.
Details are contained in the bond prospectus published on the Shanghai Clearing House website on Saturday.
The proceeds will be used to improve the bank’s overall loss absorption capacity, it said, with the issuance period extending from Wednesday to Friday.
TLAC bonds that do not count toward a bank’s capital base may be written off or converted into common stock when the bank enters the sale phase.
The country’s five largest state-owned banks, including ICBC, which are designated as global systemically important banks, are stepping up efforts to comply with stricter global capital buffer rules.
To fill the capital shortfall, five lenders unveiled plans to issue TLAC bonds totaling 440 billion yuan this year. However, Fitch Ratings estimates that they will have a TLAC deficit of RMB 1.6 trillion by January 2025.
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($1 = 7.2261 yuan)