(Yicai) June 25 -- Chinese commercial banks have issued more than double the amount of bonds so far this year than a year ago, as lenders come under increasing pressure to raise funds to pay back maturing debts and meet higher regulatory requirements, according to the latest data.

Nearly 40 banks had collectively issued CNY777.6 billion (USD107 billion) worth of tier-2 capital bonds and perpetual bonds since the beginning of the year up to yesterday, statistics from Choice, the financial data platform under East Money, showed. And the net value of the fundraising was CNY373.9 billion (USD51.5 billion), more than the same period last year.

In June alone, 13 lenders have issued CNY150 billion (USD20.6 billion) worth of tier-2 capital bonds or perpetual bonds, as per Choice data. And nine have had new quotas approved, amounting to over CNY200 billion.

A large amount of tier-2 capital bonds will mature this year and many perpetual bonds, which are usually claimable in their fifth year, have also reached their redemption period, market insiders told Yicai. This is putting banks under a lot more pressure than last year. In order to keep their capital adequacy ratios in line with regulatory requirements, banks need to issue more bonds to raise funds.

Forty-two tier-2 capital bonds worth CNY256.7 billion (USD35.4 billion) will mature this year, 41 times that of last year, according to Choice data. And 19 perpetual bonds worth CNY489.6 billion (USD67.4 billion) will be redeemable, unlike last year when none were claimable.

There are two main ways that commercial banks can replenish their capital, and these are through endogenous means and exogenous ones, said Li Qinghe, an analyst at Huafu Securities. The former is dependent on an increase in retained profits but this is becoming more difficult due to lenders’ squeezed net interest margins.

Lenders’ net interest margin dipped below the threshold of 1.7 percent for the first time in the fourth quarter last year and then slumped to 1.54 percent in the first quarter, according to the National Financial Regulatory Administration.

Bigger Reserves

Regulators also raised the requirements for the capital reserves held by commercial banks on Jan. 1, making it necessary for lenders to accelerate fundraising. The adequacy ratio of core tier-1 capital, after provision of reserve capital as required, should now not be less than 7.5 percent, that for tier-1 capital should be at least 8.5 percent and that of all capital no less than 10.5 percent.

The adequacy ratios for core tier-1 capital of seven listed banks is under 9 percent, very close to the red line of 7.5 percent, according to their first-quarter earnings reports.

On top of this, China’s five largest commercial banks by size, which are on the list of Global Systemically Important Banks, also need to meet capital replenishment requirements for total loss-absorbing capacity.

To maintain unchanged capital adequacy ratios, the net financing demand of Chinese commercial banks is likely to reach CNY1.1 trillion (USD159.8 billion) this year after taking into account their profitability, quality of assets as well as the impacts of the new rules regarding capital, according to a research report by Yang Yewei, chief fixed income analyst at Guosheng Securities. And to pay off maturing bonds, they will need to issue another CNY2.3 trillion of bonds.

Editors: Tang Shihua, Kim Taylor