China's ICBC to Sell $4bn of Total-Loss-Absorbing-Capacity Bonds

One of China’s big state lenders has said it will issue 30 billion yuan ($4.15 billion) worth of total loss-absorbing capacity (TLAC) bonds on Wednesday May 15.

The issuance of such bonds by Industrial and Commercial Bank of China will be the first by a Chinese bank.

The country’s big banks face growing pressure to raise capital, as demands mount to support the economy and highly indebted property developers and local government financing vehicles.

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ICBC, which is the world’s largest bank by assets, said it would issue 20 billion yuan in a tranche of four-year bonds it can redeem at the end of three years, and 10 billion yuan in six-year bonds with conditional redemption at the end of five years.

The details were covered in a bond prospectus released on the website of the Shanghai Clearing House on Saturday.

The proceeds are to be used to improve the bank’s total loss absorbing capacity, it said, with the issue period to run from Wednesday to Friday.

The TLAC bonds, which are not counted in a bank’s capital base, can be written off, or converted into common equities, when the bank enters the disposal phase.

Designated as global systemically important banks, five of the nation’s biggest state banks, including ICBC, are stepping up efforts to meet stricter global regulatory rules on capital buffers.

To plug a capital shortfall, the five lenders have unveiled plans this year to issue a total of 440 billion yuan of TLAC bonds. Still, they will have a TLAC shortfall of 1.6 trillion yuan by January 2025, Fitch Ratings estimates.