Chinese lenders account for over half of bank capital raises in APAC

Chinese banks accounted for more than half of debt issuance in Asia-Pacific in May, as refinancing needs pushed banks to seek capital from the market.

Banks in the region raised a combined $11.50 billion via debt securities in May, compared with $10.36 billion a year ago, according to data compiled by S&P Global Market Intelligence on a best-efforts basis. The region's banks raised $13.25 billion in the previous month.

Chinese banks China Minsheng Banking Corp. Ltd., The Export-Import Bank of China, China Bohai Bank Co. Ltd. and Asian Infrastructure Investment Bank issued $5.89 billion in debt securities, driving issuance in the period, with the remainder coming largely from South Korean, Japanese and Australian lenders, the data shows.

The aggregate debt figures for the region's banks include bonds, senior debt and preferred securities.

Growth ahead

The debt issuance of major Chinese lenders is expected to pick up in the coming months, amid regulatory requirements and authorities' efforts to reinvigorate the economy. GDP grew 4.5% year over year in the first quarter, falling short of the government's 5.0% target for the year. Several sectors of the Chinese economy are yet to fully recover from the COVID-19 pandemic, which pushed GDP growth to a decades-low 3% in 2022.

Chinese lenders are expected to build buffers for total loss-absorbing capacity (TLAC). The country's global systemically important banks (G-SIBs) have an estimated $550 billion capital gap to fill before the Jan. 1, 2025, deadline to meet TLAC requirements, according to S&P Global Ratings.

South Korean banks stepped up their debt issuance in May, with lenders including The Korea Development Bank and KB Kookmin Bank issuing securities in foreign currency for working capital needs.

Solid fundamentals and an improving macro backdrop make a compelling case for investors to tap specific issuers within the more appealing segments of the Asian investment-grade and high-yield landscapes, PineBridge Investments said in a June 20 report. Positive commentary from international agencies regarding growth prospects of Asia nations continues to support the fixed-income landscape, the asset manager said.

Asia-Pacific banks raised $0.94 billion in May via share sales, down from $1.20 billion a month ago and $1.49 billion a year ago, Market Intelligence data shows.

Two noteworthy transactions included the follow-on equity transaction of Rizal Commercial Banking Corp. worth $487.28 million and E.SUN Financial Holding Company Ltd.'s transaction worth $455.27 million.