Within a month, four small and medium-sized banks announced that they would not redeem their Tier 2 capital bonds
According to information from China Bond Information Network, in November this year, Huludao Bank, Fuxin Bank, Henan Yichuan Rural Commercial Bank, and Daxinganling Rural Commercial Bank successively announced that they would not exercise the redemption option of secondary capital bonds, involving a total of 2.7 billion yuan in bond issuance.
So far, 15 banks have issued non-redemption announcements on Tier 2 capital bonds during the year, involving 13 small and medium-sized banks, mainly rural commercial banks. Among them, Jiujiang Bank and Anhui Taihe Rural Commercial Bank were corrected to exercise the right of redemption after the announcement.
It is worth mentioning that compared with 2022, the non-redemption situation has declined since 2023, mainly due to the small number of bank secondary bonds that entered the redemption period during the year. However, considering that the pressure on the maturity redemption of bank perpetual bonds will begin to emerge from next year, the probability that low-rated small and medium-sized banks will not redeem their capital instruments may further increase in the future.
Four homes a month.
According to the announcement, Huludao Bank, Fuxin Bank, Henan Yichuan Rural Commercial Bank, and Daxinganling Rural Commercial Bank announced in November that they would not exercise the redemption option of secondary capital bonds, involving 500 million yuan, 1.7 billion yuan, 300 million yuan and 200 million yuan of bonds issued by the aforementioned banks, respectively.
Among them, Huludao Bank has announced the non-redemption of two Tier 2 capital bonds during the year, with a total scale of 1.5 billion yuanIn addition to the above-mentioned 1.7 billion yuan of secondary capital bonds announced that it will not be redeemed, Fuxin Bank has another 1.5 billion yuan secondary capital bond ("20 Fuxin Bank Tier 2 01") is still in existence.
It is understood that Huludao Bank and Fuxin Bank are both commercial banks in the inner city of Liaoning Province. In accordance with the relevant requirements of the reform of information disclosure and in light of their own actual conditions, the annual reports of the two banks have not been disclosed in recent years, and the rating agencies have also postponed the issuance of follow-up rating reports.
Yichuan Rural Commercial Bank is the first rural commercial bank established in Henan Province, which was opened in 2009, and suffered a "run" in October 2019.
It is worth noting that in July 2019, CCXI downgraded both the main credit rating and debt rating of Yichuan Rural Commercial Bank, its main rating from AA- to A+, and the credit rating of "18 Yichuan Rural Commercial Level 2 01" from A+ to A. The latter is the bond for which the redemption option was not exercised.
In the follow-up rating process, Yichuan Rural Commercial Bank did not provide the complete materials required for rating, so the rating agency could not make a judgment on the credit status of Yichuan Rural Commercial Bank. In November 2020, CCXI announced that it had terminated the rating of the main body and related debts of Yichuan Rural Commercial Bank.
Daxinganling Rural Commercial Bank is also the first rural commercial bank in Heilongjiang Province, which was restructured and established at the end of 2010. As of the end of last year, the bank's single largest shareholder was Macrolink Holdings, with a shareholding ratio of 18%.Hulunbuir Xinglong Logistics, Baoquan Beer, etc. constitute a concerted action relationship, holding a total of 1846% equity;Daxinganling Group holds a total of 1286% equity.
According to the rating report issued by United Credit, the number of shares pledged or frozen by the bank accounted for about 33 at the end of last year2%。Among them, the single largest shareholder, Macrolink Holdings, defaulted on its bonds, and the eighth largest shareholder, Baoquan Beer, was included in the list of dishonest judgment defaulters.
Why not redeem?
As an important tool for commercial banks to supplement Tier 2 capital, Tier 2 capital bonds have been widely issued in recent years, especially favored by non-listed small and medium-sized banks with relatively limited capital replenishment channels.
At present, the mainstream issuance period of bank Tier 2 capital bonds is "5+5", and the principal included in Tier 2 capital decays by 20% annually five years before maturity. Therefore, under normal circumstances, commercial banks usually choose to redeem in advance and then issue additional issues.
However, since 2017, the phenomenon of unredeemed bank Tier 2 capital bonds at maturity has begun to appear, and it will increase significantly in 2021 and 2022, which has attracted market attention.
According to the statistics of the fixed income team of Guojin, as of the end of last year, there were 52 unredeemed bank Tier 2 capital bonds, involving 44 banks, and the scale of unredemption reached 35.1 billion yuan. The issuers involved include 10 urban commercial banks and 34 rural commercial banks, and the outstanding redemption scale of urban commercial banks and rural commercial banks is 13.1 billion yuan and 22 billion yuan respectively.
Since the beginning of this year, the non-redemption situation has declined. In the first eight months, a total of 11 bank Tier 2 capital bonds issued non-redemption announcements, involving 10 small and medium-sized banks, mainly rural commercial banks. Among them, Jiujiang Bank and Anhui Taihe Rural Commercial Bank were corrected to exercise the right of redemption after the announcement.
However, two months later, in November, four new bank Tier 2 capital bonds announced non-redemption, involving a total of 2.7 billion yuan in bond issuance.
The report of the research team of China Bond Credit Finance Industry concludes that most of the non-redeemable banks are small and medium-sized commercial banks with small asset scale, poor asset quality and low capital adequacy level, and the core reason for their non-redemption of Tier 2 capital bonds is that there is a certain capital gap in themselves, especially after the real asset quality is restored, the pressure on capital replenishment is greater.
At the same time, poor profitability cannot provide effective endogenous capital replenishment, coupled with weak shareholder support and market recognition, which leads to the blocking of capital replenishment through shareholder capital increase or refinancing. Under multiple pressures, if the bank chooses to redeem, it will cause a larger capital gap for the commercial bank, and in order to meet the regulatory requirements for the capital adequacy of the bank, the bank chooses not to redeem. The report said.
At the same time, the report points out that the non-redemption of bank Tier 2 capital bonds may cause investors to worry about the risks of the bank or even financial institutions in the region, forming a certain degree of negative financing feedback, affecting the issuance of new capital instruments by banks or the increase in issuance costs. For investors, the non-redemption of Tier 2 capital bonds has increased the pressure of valuation volatility and maturity mismatch to a certain extent.
Editor-in-charge: Wang Yunpeng.
Proofreading: Liao Shengchao.