China's biggest bank to issue sub-debts

The Industrial and Commercial Bank of China (ICBC) is projected to issue subordinated debts soon to boost its capital base ahead of public listings, a bank spokesman said Friday.

"We are trying to issue the debts later this month, following approval from the regulatory department," the spokesman told a promotion fair.

Sub-debts holders rank low among creditors, which allows buyers to demand a relatively high coupon interest rates. Funds raised can be represented by a bank's capital adequacy ratio (CAR), a measure of its own capital in proportion to its total lending,

Following the debts issue, the ICBC -- assets-wise the country's biggest commercial bank -- hopes to raise its CAR to 8 percent, the minimum level for a commercial bank by the international standard.

The bank's CAR now stands at 6 percent after the central government injected 15 billion US dollars in foreign exchange reserves into the bank in a bailout package last June.

Earlier this month, China's central bank announced that the ICBC will be transformed into a joint-stock company by the end of September, laying a basis for the bank to go public in 2006, as industrial insiders perceive.

China is in the midst of overhauling its state banks, including the ICBC, China Construction Bank and Bank of China, ahead of the World Trade Organization-mandated opening of its financial market to foreign rivals by the end of 2006.

The domestic banks hope to strengthen corporate governance and streamline their operation by resorting to public listings.

On Friday, the ICBC spokesman said the bank's sub-debts boast high "safety, liquidity and returns" and should be a best seller among institutions with stable fund sources and investment demand, including commercial banks, insurers and fund managers and consortia.

More than 40 well-known enterprises from home and abroad discussed with the ICBC possible debt purchases at the fair.

Source: Xinhua