Banks issued nearly 900 billion bonds in half a year, and small and medium-sized banks intensively supplemented their blood

  With the acceleration of bank asset investment in the middle of the year, the pressure of bank capital replenishment continues, especially for small and medium-sized banks.

Wind Information data shows that as of June 29, commercial banks have issued 122 ordinary bonds, secondary capital bonds, perpetual bonds and convertible bonds this year, with a total scale of 894.62 billion yuan, which is significantly higher than the same period last year.

  Among them, although the scale of single bond issuance by the six state-owned banks is relatively large, only 11 were issued, and the rest are small and medium-sized banks. The number of small and medium-sized banks issuance has increased significantly, becoming the main force in the market to "replenish blood".

  According to industry insiders, in the later stages of the epidemic, under the influence of multiple factors such as the slowdown in profit growth, the rising risk of non-performing assets, the decline in domestic economic growth, and the tightening of regulatory policies, small and medium-sized banks are facing greater pressure to supplement capital.

In this regard, there are opinions that the capital supplement tools for small and medium-sized banks can be further optimized and differentiated supervision can be promoted.

Bond issuance heats up

  In the first half of this year, the pace of bank capital replenishment accelerated.

According to Wind Information, CBN, as of now, banks have issued nearly 900 billion yuan of bonds during the year, surpassing the issuance of 826.4 billion yuan in the same period last year; the number of bonds issued was 122, exceeding 83 last year.

  From the perspective of bond issuance types, the issuance of bank perpetual bonds has accelerated. 32 perpetual bonds have been issued, with a scale of 310.5 billion yuan, which is higher than the 287.1 billion yuan in the same period last year; 67 secondary capital bonds of banks have been issued, with a scale of 421.2 billion yuan; 51 ordinary bonds were issued with a scale of 414.5 billion yuan; 4 convertible bonds were issued with a scale of 60 billion yuan.

  Behind the increase in the scale of bank issuance of bonds is the increase in demand for capital replenishment.

According to data from the China Banking and Insurance Regulatory Commission, as of the end of the first quarter of 2021, the core tier 1 capital adequacy ratio of commercial banks was 10.63%, a decrease of 0.09 percentage points from the end of the previous quarter; the tier 1 capital adequacy ratio was 11.91%, a decrease of 0.13 percentage points from the end of the previous quarter. ; The capital adequacy ratio was 14.51%, a decrease of 0.19 percentage points from the end of the previous quarter.

  A person from the Asset and Liability Department of China Merchants Bank said that due to the slowdown in economic growth in recent years and the decline in the quality of credit assets, commercial banks have a rigid demand for the growth of total capital.

In the context of interest rate liberalization and low global interest rates, banks’ net interest margins have gradually narrowed, endogenous capital replenishment capabilities have declined, and the banking industry’s price-to-book ratio is generally less than 1%, restricting the operability of equity financing.

  In fact, since 2014, the inadequacy of banks' endogenous capital replenishment capacity has gradually become prominent.

At the same time, the number of Tier 2 capital bonds issued to supplement Tier 2 capital began to increase.

Subsequently, since 2017, preferred stocks and convertible bonds issued to supplement Tier 1 capital have increased.

Since 2019, the issuance of perpetual bonds has increased.

"In contrast, the three major debt financing instruments (secondary capital bonds, perpetual bonds, convertible bonds) have the largest issuance scale and are the main capital replenishment channels." The above-mentioned person said.

  At present, with the approach of the end of the second quarter, there are opinions that the issue of bank bonds will continue to increase.

Guo Yixin, an analyst at Industrial Research, said that insufficient bank profit generation and routine dividends have increased the urgency of capital replenishment.

Judging from the current issuance environment, stock prices have been steadily falling, and cost advantages have become more prominent; the mode of holding groups and mutual holding by small and medium banks can still be maintained for the time being.

"For all types of banks, it is a good window for issuing capital instruments at all levels to replenish capital." He said.

Small and medium-sized banks account for a large proportion

  While banks are increasing the scale of bond issuance, an obvious feature is that more and more small and medium-sized banks have joined the issuance team.

According to statistics from reporters, in the first half of this year, of the 122 bonds issued by banks, only 11 involved the six major banks, namely the Industrial and Agricultural China Construction Diplomatic and Postal Savings Bank of China, and the rest were issued by small and medium-sized banks.

  "It can be seen that compared with previous years, the proportion of small and medium-sized banks issuing bonds is increasing. On the one hand, this is related to the stronger capital replenishment demand of small and medium-sized banks, and on the other hand, it is also affected by current policies." Senior practitioners in the banking industry told reporters.

  Zhou Maohua, an analyst at the Financial Markets Department of Everbright Bank, also analyzed that compared with the continuous decline of the interest rate center in 2020, the level of interest rates this year is higher than that of last year, and the willingness and scale of some large banks to issue relatively declined.

At the same time, the above-mentioned issuance structure also shows that small and medium-sized banks are under pressure to replenish capital this year. Under the influence of factors such as increasing the disposition of non-performing assets and changes in the regulatory environment, small and medium-sized banks are still under pressure to replenish capital.

  In fact, since last year, the issue of capital replenishment in small and medium-sized banks has attracted regulatory attention, and relevant departments have gradually introduced innovative methods of capital replenishment.

For example, in July 2020, the executive meeting of the State Council decided to allow local government special bonds to supplement the capital of small and medium-sized banks by subscribing to convertible bonds.

In addition, many regulatory agencies have also issued notices and documents to support qualified banking institutions to replenish capital through the issuance of stocks, non-fixed-term capital bonds, and secondary capital bonds to ensure the stable operation of small and medium-sized banks.

  The latest data shows that as of the end of the first quarter of 2021, the capital adequacy ratios of city commercial banks, private banks, and rural commercial banks were 12.7%, 13.13%, and 12.12%, respectively, all of which were down from the end of the previous quarter.

In the eyes of many industry insiders, there will be more small and medium-sized banks to increase capital replenishment in the future.

In this regard, Wang Tianyu, chairman of the Bank of Zhengzhou, once suggested that supporting small and medium banks to replenish capital through multiple channels can further optimize the capital replenishment tools for small and medium banks.

  In addition, Wang Tianyu also said that it can promote differentiated supervision of the issuance of capital supplement instruments for small and medium banks.

Taking into account indicators such as asset scale and profitability, the classification of small and medium-sized banks is further refined.

For the same capital replenishment tool, set different issuance standards and approval requirements for different classifications of small and medium-sized banks, and introduce more specific and more applicable operation rules for small and medium-sized banks.

(Author: Duan Siyu)