BOC raises DCM profile with $3.8b European issuance
(12 April 2019 – Europe) Bank of China (BOC) is expanding its debt capital markets (DCM) profile in Europe and Australia with bond offers in Frankfurt, Luxembourg and Sydney in addition to Hong Kong and Macau.
BOC possesses the largest overseas portfolio among Chinese banks and applies more stringent risk mitigation and stronger asset quality than at home, with an overseas non-performing loan ratio of 0.2 percent in 2018 in contrast to 1.8 percent for its domestic loans according to Moody’s. To support Chinese companies venturing abroad, the Bank aims to expand its overseas business to 40 percent of total assets term from 26 percent in 2018, according to a recent report from Fitch Ratings.
The state-owned bank has sold $3.78 billion in eight tranches of Reg S paper in multiple currencies. The $3.78 billion of senior unsecured notes will be drawn from BOC’s $40 billion 12-month medium term note programme, which the Hong Kong and Shanghai-listed lender announced at the start of the month. The size of this year’s programme has increased to $40 billion, equivalent to 1.3 percent of BOC’s total liabilities plus equity, from $30 billion last year, to meet the bank’s increased funding needs.
This is the first time that BOC has sold bonds in Frankfurt under its medium term note programme. In previous years, the bank has issued bonds drawn from its programme in Hong Kong, Macau, Sydney and Luxembourg. BOC will issue €500 million ($564 million) 3-year fixed rate bonds in Frankfurt, at mid-swaps (MS) +48bp, which is 22bp tighter than initial price guidance of MS +70bp. “It helps to entrench BOC in Germany, one important segment of continental Europe’s markets,” said Moody’s VP and Senior Analyst Nicholas Zhu.