China Bond House: Bank of China

IFR Asia Awards 2019
3 min read
Carol Chan

Growing reach

Bank of China added a growing focus on innovation to its already strong underwriting capabilities in 2019, leveraging on its global network to inaugurate new products and new markets for Chinese issuers.

In its home market, the A1/A/A rated lender in January issued the country’s first onshore perpetual bonds, after new regulations allowed the instruments for the first time. The Rmb40bn (US$5.9bn) offering of 4.5% undated Additional Tier 1 securities set a solid benchmark and paved the way for other Chinese banks to strengthen their capital.

In the offshore market, BOC in October printed China’s first bond linked to the secured overnight financing rate, the floating rate that is expected to replace Libor after 2021.

The US$350m SOFR green bond, through its Macau branch, set a template for others to follow.

Before BOC’s deal, SOFR issuers were mainly supranational issuers like the World Bank and the Asian Development Bank, but it was the first commercial bank to test the waters.

As China’s most global bank, BOC also showed off its international credentials in executing multi-tranche and multi-currency deals, such as a US$3.78bn-equivalent four-currency Silk Road bond in April, simultaneously selling bonds in US dollars, euros, Australian dollars and offshore renminbi.

BOC, itself an active green issuer, also helped others issue green bonds during the year, such as Wuhan Metro Group, China General Nuclear Power Corp and State Development & Investment Corp.

BOC again topped the underwriting table for G3 bonds from China with US$11.7bn of volume and a 6.4% market share during IFR’s review period.

Leveraging its relationships in a wide range of industries, BOC arranged offshore bonds for Chinese local government financing vehicles, central state-owned enterprises, financial institutions and property developers, which dominated a record year for Asian high yield.

BOC also played a key role in China’s a €4bn (US$4.4bn) triple-tranche sovereign deal in November, the nation’s first euro trade in 15 years, which drew robust demand and set a sound benchmark for Chinese corporates.

Beyond China, other landmark deals included Asian Infrastructure Investment Bank’s US$2.5bn debut, the Philippines’ US$1.5bn global bond, and Sri Lanka’s two global bond offerings that raised a total US$4.4bn.

In the renminbi market, BOC remained at the forefront of the internationalisation of the currency. It played a major role in China’s Rmb2bn Dim Sum bond issue in Macau, and retained its leading position in the Panda market.

Notable deals included Portugal’s Rmb2bn Panda, the first from a Eurozone sovereign, the Philippines’ second Panda bond, BMW Finance’s private placement and United Overseas Bank’s Panda debut.

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