China's Bank of Communications announced on Monday it would issue subordinated bonds worth 25 billion yuan (3.21 billion U.S. dollars) through the country's interbank market.

The bonds, some with 10-year terms and some with 15 years, will be issued from March 6 to 8 this year, according to a statement from the bank.

The Shanghai-based company, China's fifth largest bank, has chosen the China Galaxy Securities Co. Ltd. as the only managing underwriter and bookrunner.

This will be the largest issue of subordinated bonds to be underwritten by a securities dealer since China launched its interbank market in June, 1997.

The underwriting syndicate is made up of the 40 "most vigorous" financial institutions in the interbank market, including state commercial banks, urban commercial banks, insurance companies and securities dealers, said the bank.

The issue shows the bank's belief in the stable development of China's bond market as the central bank's recent decision to raise the deposit reserve ratio dulled expectations for a new rise in the interest rates, according to Monday's China Securities Journal.

Jiang Chaoliang, board chairman of the bank, has said the issue is aimed at replenishing the bank's supplementary capital and improving its capital adequacy.

The bank's capital adequacy ratio (CAR), the measure of its own capital in proportion to its outstanding loans, dropped to 11.09 percent in September 2006 from 11.2 percent at the end of 2005, according to the bank's report for the third quarter last year.

The bank, the first domestic lender to list in Hong Kong, has decided to return to the yuan-denominated A-share market this year by issuing 4.5 billion A-shares and listing on the Shanghai Stock Exchange.

But the exact timing of the listing has not yet been disclosed.

The Bank of Communications, established in 1908, became the first joint-stock commercial bank on the Chinese mainland in 1987 and listed on the Hong Kong stock market in 2005.

The bank had 1.4 trillion yuan in assets at the end of 2005, with after-tax profits reaching 9.25 billion yuan in the year.

Source: Xinhua