Following a full quarter of inactivity, the pace of issuance for commercial bank secondary capital bonds and perpetual bonds, collectively known as 'secondary and perpetual bonds', has accelerated significantly since the second quarter.
Data reveals that as of June 24th, 17 commercial banks have issued a total of 33 such bonds, amounting to a substantial 980 billion yuan. State-owned major banks have been the dominant force in this issuance. Six of these large banks have issued 16 bonds this year, totaling 615 billion yuan, which accounts for over 60% of the total market issuance.
Recently, China Construction Bank completed the issuance of its first series of perpetual capital bonds for 2026. This issuance had a total scale of 30 billion yuan, comprising a base issuance of 20 billion yuan with an oversubscribed additional 10 billion yuan. The bonds carry a 5+N year term with a coupon rate of 1.92% and achieved a bid-to-cover ratio of 2.4 times.
According to the bank, the issuance successfully balanced scale and pricing under controllable costs, precisely matching market investment demand. The raised funds will be used to supplement other tier-one capital, aiding the bank in continuously strengthening its multi-layered capital base and solidifying its developmental foundation.
In June alone, four major banks—Industrial and Commercial Bank of China, Bank of China, China Construction Bank, and Postal Savings Bank of China—collectively issued seven secondary capital and perpetual bonds worth a total of 280 billion yuan.
The issuance of these bonds by commercial banks experienced a prolonged lull from January to April this year, influenced by factors including regulatory approval processes, and only began to pick up volume starting in May.
Industry observers note that with the concentrated release of pent-up issuance demand, coupled with the rigid need for banks to 'redeem old and issue new' bonds around mid-year maturities and call dates, the second quarter has become the core window for supply in this market segment for the year.
An analyst indicated that the capital replenishment needs of commercial banks remain substantial. Concurrently, there is investment demand in the market for high-quality assets like these bonds. With these multiple demands converging, it is anticipated that issuance volumes will remain at a high level in the near future.
While major state-owned banks have been intensively issuing bonds to bolster capital, the participation of small and medium-sized banks in this market has been noticeably lackluster this year.
As of June 23rd, all six major state-owned banks have issued secondary capital or perpetual bonds. Among city commercial banks, only four have issued perpetual bonds totaling 40 billion yuan, with no records of secondary capital bond issuance. Rural commercial banks have seen zero issuance, maintaining a cold stance.
Analysis suggests that the slow progress in bond issuance by these smaller banks is not due to a lack of approved quotas, as they still hold substantial unused approval amounts. The weakness in supply is more likely related to a narrowing of issuance channels.
Notably, facing lower-than-expected bond issuance, many small and medium-sized banks have turned to alternative methods such as capital increases and share expansions or private placements to raise their registered capital.
This year, capital increase plans for over 80 city and rural commercial banks have been implemented, with rural commercial banks accounting for more than 80% of these.
The trend this year shows three main characteristics: local state-owned assets playing a leading role, a predominance of private share placements, and noticeable regional concentration. Provinces like Hebei, Shandong, Jiangxi, and Hubei have become focal points, with local governments assisting banks in replenishing core capital through methods like fiscal injections and introducing strategic investors.
Comments