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​Chinese banks’ cravings for liquidity may continue in 2019

Xinhua Financein CFBOND
2019-01-10 10:32

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Some cash-strapped banks in China may continue seeking more liquidity in 2019, said a report of Economic Information Daily on Wednesday.

In 2018, A-share banks raised 531.5 billion yuan (77.72 billion U.S. dollars) at the securities market to supplement their capital, including 108 billion yuan (15.79 billion U.S. dollars) from private placements and initial public offerings (IPOs), 102.5 billion yuan (14.99 billion U.S. dollars) from preferred stocks, 308 billion yuan (45.04 billion U.S. dollars) from tier-2 capital bonds, and 13 billion yuan (1.9 billion U.S. dollars) from convertible bonds.

The biggest deal of them was one made by Agricultural Bank of China which concluded its private placement in July 2018 to pocket 100 billion yuan (14.63 billion U.S. dollars), a record high in the history of the A-share market.

Other banks were eager to go public. In 2018, over 30 rural and urban commercial banks at home were busy in their preparations for an IPO.

This thirst for liquidity was a result of multiple factors, according to Wen Bin, chief analyst of China Minsheng Bank.

On the one hand, banks saw their capital decrease as they downsized their balance sheets and handled non-performing assets. On the financing side, their source of funds was shrinking along with their narrowing profit margins and the slumping capital market.

China is mulling more policies to give banks more financing channels.

At the end of last year, a committee under the State Council, which oversees financial stability and development in China, held a meeting to discuss the issue of perpetual bonds, a kind of fixed-income security with no maturity.

Since December 2018, China’s financial regulators have begun to accelerate approval for banks’ requests to obtain more liquidity.
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