BEIJING: The Agricultural Bank of China and China Minsheng Banking Corp plan to issue subordinate bonds worth 30 billion yuan ($4.57 billion) and 10 billion yuan ($1.5 billion), respectively, sources close to the deals said on Wednesday.
AgBank, the country's third largest bank by assets, will issue its bond later this year, while Minsheng Bank, the seventh largest, will issue its bond this month, three sources said on condition of anonymity.
Earlier on Wednesday, the Bank of China's chairman said his bank might also issue subordinate debt this year to preserve its capital base.
The sources did not say why AgBank and Minsheng were issuing the bonds, but the moves come as Chinese banks face higher reserve requirements, providing an incentive for them to increase their capital base.
"Liquidity is tightening because of the various central bank measures such as raising reserve required ratios," Bank of China Chairman Xiao Gang told reporters at the annual meeting of the National People's Congress on Wednesday. "The big banks are also seeing liquidity tighten."
There will be five lead underwriters for the AgBank bond, including Chinese investment bank CICC, the sources said.
The bond is part of a 50 billion yuan debt issuance approved earlier this year by AgBank shareholders.
Haitong Securities will be the lead underwriter for Minsheng Bank's bond, and the co-underwriters will be UBS and Zhong De Securities, Deutsche Bank's securities joint venture in China, according to the sources.
The Minsheng bond should be issued the week after next, one of the sources said.
China's big state controlled banks will be subject to a minimum capital adequacy ratio of 11.5 percent under "normal conditions", according to the China Banking Regulatory Commission.
Smaller banks will be held to a minimum CAR of 10.5 percent, according to commission regulations.
At the end of the third quarter of last year the average capital adequacy ratio of the biggest banks was 11.6 percent, and for smaller banks the average was 9.5 percent.
Corporate debt issuers are increasingly turning to the yuan, also known as the renminbi, to raise money, a trend that is fuelling the offshore market for bonds denominated in yuan.
The Agricultural Bank of China was the last of China's big four state controlled banks to go public, raising $22.1 billion last year in what at the time was the world's biggest-ever IPO.
Minsheng Bank, China's first privately held bank, specialises in loans to small and medium-sized enterprises, and says that more than half its loans this year will be extended to SMEs.
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