Green Japan 09 KHFC euro covered debut 10 Aussie IPO window closed 10
the EXPORT-IMPORT BANK OF CHINA,
which became the only policy
bank to issue T2 notes.
It printed Rmb30bn 10-year
non-call five T2 notes at 4.83% on
September 27 and subsequently
issued another Rmb30bn tranche
at 4.71% on October 17.
The big five and national joint-
stock commercial lenders issued
substantial amounts. BANK OF CHINA
raised Rmb80bn from T2 bonds
in two tranches, while China
Citic Bank priced Rmb50bn T
bonds in two tranches in the past
two months.
For rural commercial lenders,
sizes have been as small as
Rmb300m, like the offering
from Shanxi Qingxu Rural
Commercial Bank, which priced
a 10-year non-call five at 5.80%.
Banny Lam, head of research
at CEB International, said
Chinese banks’ capital needs
will remain huge due to stricter
capital rules and deteriorating
asset quality, as China grapples
with an escalating trade war
with the US, Fed monetary
tightening and weak emerging
market currencies.
“With China’s A-share market
expected to continue to fluctuate
and face pressure in the short
term, bank capital securities are
likely to remain one of the major
instruments for banks to boost
their capital,” said Lam.
The China banking system’s
common equity Tier 1 ratio
stood at 10.65% as of end-June,
compared with a regulatory
requirement of 8.5%–9.0% for
systemically important banks
and 7.5% for other banks,
according to Moody’s.
Moody’s said the full phase-in
of a capital conservation buffer
by end-2018 will result in higher
capital requirements. At the
same time, risk-weighted assets
growth will remain higher than
total asset growth as a result of
the migration of some previous
shadow banking assets back to
loans on bank balance sheets.
“Banks that experience
fast growth in RWAs could be
challenged in their management
of capitalisation without external
capital injections because the
internal generation of capital
from retained earnings alone
might not be able to support
rapid growth in RWAs,” the
rating agency said. “These
developments will continue to
drive banks’ capital raising in the
next 12-18 months.” committed as they look to put
more money to Australian
businesses, especially for longer-
term lending,” said Gavin
Chappell, head of syndications
Australia at ANZ.
“In addition we are seeing
greater participation from
international banks which have
returned to the loan market en
masse over the last three years,
having withdrawn or scaled
down their Australian presence
during the global crisis.”
A Sydney-based DCM manager
predicts a decline in bond
issuance from Australia’s four
dominant banks as lending
growth slows to around A$95bn–
$100bn in fiscal year 2019,
largely for refinancing, which
would be almost A$20bn below
recent annual levels.
“Since Australian banks have
a natural preference for cheaper
onshore issuance it is overseas
markets which should bear
the brunt of the overall supply
contraction,” he said.
Indeed major bank US dollar
issuance has fallen to US$11.7bn
so far this year from US$20.25bn
in the same period in 2017 while
euro issuance is slightly higher
at €8.25bn versus €7.75bn,
according to Refinitiv data.
Such a slowdown is helpful
from a pricing perspective as
scarcity value generates tighter
outcomes in the primary and
secondary markets for the
still well-regarded (by bond
investors, at least) Double A rated
Australian major banks.
Reduced supply also soothes
these banks’ perceived Achilles
heel – an over-reliance on
offshore funding. For daily news stories
visit http://www.ifrasia.comAMP plans sub-notes
after share bloodbath
Bonds Stock plunge overshadows Aussie financial’s
Tier 2 roadshowBY JOHN WEAVERSScandal-hit financial group
AMP could hardly have picked
a worse day to announce an
Asian and Australian roadshow
for a potential Australian dollar-
denominated 10-year non-call
five subordinated note offering.
Last Thursday’s mandate,
awarded to ANZ, CBA, NAB and
UBS, coincided with a 24.5%
plunge in the 169-year-old
company’s share price after it
revealed investors had shifted
A$1.5bn (US$1.06bn) out of its
wealth management business in
the three months to September.
The latest decline, following
A$243m of withdrawals in
the second quarter, took
the division’s total assets
under management down to
A$132.6bn, with more client
exits in the pipeline.
Anglican National Super said
it will move its A$250m pension
fund to pastures new, while
Australia Post has dropped AMP
as its default manager.
Investors were also alarmed
by AMP’s announcement that
it would sell its life insurance
and wealth protection business
to British Resolution Life for
A$3.3bn, which is almost a fifth
below book value.
The company also plans to
divest its New Zealand wealth
management and advice
business through an IPO in 2019
to release capital to the group.
AMP, which provides
superannuation and investment
products, insurance, financial
advice and banking products
in Australia and New Zealand,
is perhaps the biggest casualty
of the widespread homegrown
scandals that have ravaged its
previously positive reputation.
In April, chief executive Craig
Meller and chairman CatherineBrenner resigned after AMP
executives admitted in
testimony that the company had
lied to the corporate watchdog
for almost a decade to cover a
practice of charging customers
for services it did not provide.
S&P subsequently placed
AMP on credit watch negative
as it assesses the reputational
damage to AMP’s brand,
while Moody’s declared “AMP
governance failures alleged
at the Royal Commission into
the financial sector are putting
additional pressure on its
rating”.
In June, investors appeared
to push back on AMP Group’s
debut Swiss bond offering, a
SFr110m (US$112m) 0.75% 4.5-
year note which priced 85bp
wide of mid-swaps, well outside
initial 65bp–70bp soundings.
In September, AMP Bank sold
a A$400m three-year floating-
rate note which paid a premium
for parent AMP Group’s
prominent role in Australia’s
financial scandals.
AMP may have little choice
but to proceed with the
upcoming roadshow given that
its outstanding A$325m Tier 2
note is expected to be called on
December 18.
The 10-year non-call five AMP
Notes 2, rated BBB+ (S&P), were
issued in December 2013 and
pay a coupon of 265bp over 90-
day BBSW.
On August 29 this year,
Suncorp Group sold a A$600m
10.25-year non-call 5.25-year
Tier 2 note, rated BBB+/A– (S&P/
Fitch), in Australia’s wholesale
market at three-month BBSW
plus 215bp.
AMP’s investor meetings
begin in Hong Kong on October
30 and continue in Singapore,
Melbourne and Sydney over the
next three days.