Asia-Pacific banks' aggregate debt issuance volumes rose more than 60% year over year in July, driven by multiple billion-dollar offerings from mainland Chinese and Japanese banks.
The region's banks raised an aggregate $20.43 billion via debt securities in July, compared with $12.67 billion a year ago, according to data compiled by S&P Global Market Intelligence. The July total, however, was down from $32.93 billion in the prior month, driven by mainland Chinese and Australian banks seeking to strengthen their capital. Mainland Chinese and Japanese banks accounted for more than 60% of the capital raised in July.
Industrial and Commercial Bank of China Ltd.'s $6.87 billion additional Tier 1 offering was the largest debt issuance in July, accounting for one-third of the aggregate capital raised. Industrial and Commercial Bank of China, the world's largest bank by assets, said it plans to use proceeds from the bond issuance to replenish its additional Tier 1 capital. Japan Bank for International Cooperation's $1.50 billion debt offering was the second-largest issuance, followed by Zhongyuan Bank Co. Ltd.'s $1.10 billion debt offering.
Mainland Chinese banks, especially those that are state-owned, are likely to stay active in the capital markets, Iris Tan, senior equity analyst for Morningstar, said in an email.
State-owned banks "obtained regulatory approvals for issuance of tier two capital bonds and perpetual bonds in 2023," Tan said. "As of mid-2024, there are still 1.4 trillion yuan [of] new issuance quota unused. As banks enter maturity peak in [the third quarter], I expect the trend will continue."
Tan also said that banks' rapid asset expansion during the pandemic period and weakening profitability are some of the reasons behind increasing needs for capital replenishment.
Growing debt issuance volumes
Aggregate debt-issuance volumes have grown globally this year even as issuers remain cautious amid uncertainties around interest rates, geopolitical tensions and global economic growth. Global bond issuance is expected to grow 9% in 2024, with upside potential, according to a July 29 S&P Global Ratings report.
Bond issuance has been "heady" in the first half of the year for nearly all covered sectors, with volumes growing to $4.699 trillion from $4.151 trillion a year ago, according to the report. The Asia-Pacific banking sector saw similar trends, as they raised more than $179 billion via debt securities in the January–July period, compared to $134.17 billion in the same period of 2023, S&P Global Market Intelligence data shows.
In total, mainland Chinese banks and their units raised $9.65 billion via debt securities in July, while their Japanese peers issued $4.65 billion of debt securities, according to Market Intelligence data. Banks based in Australia and New Zealand issued an aggregate $4.05 billion of debt during the month.
Japanese megabanks are typically the biggest debt issuers in East Asia after the Chinese banks, followed by Singaporean and South Korean banks, Michael Makdad, senior equity analyst for Morningstar, said in an email.
"I don't think the debt issuance is driven by low interest rates, in part because so much of the issuance is in [US dollars] (where rates now are not particularly low) but also because issuance is driven mainly by asset-liability management rather than cost concerns," Makdad said.
Equity offerings
In July, multiple Asia-Pacific banks completed equity offerings in their respective markets, raising $777 million in total proceeds, according to Market Intelligence data.
IDFC First Bank Ltd.'s $383.3 million offering was the largest common stock issuance in July, followed by Aozora Bank Ltd.'s $321.3 million offering and PT Bank IBK Indonesia Tbk's $71.9 million offering.
