ICBC initiates TLAC bond sales with $4.15 billion issue

Industrial and Commercial Bank of China (ICBC) has announced its intention to issue 30 billion yuan ($4.15 billion) worth of total loss-absorbing capacity (TLAC) bonds on May 15, marking a major milestone as the first issuance of such bonds by a Chinese bank.

Facing escalating pressure to bolster capital reserves, particularly amid calls to support the economy, property developers, and local government financing vehicles, China's major state-owned lenders are actively seeking avenues to raise capital.

The world's largest bank by assets detailed its bond issuance plan, which includes 20 billion yuan in a tranche of four-year bonds redeemable at the end of three years, and 10 billion yuan in six-year bonds with conditional redemption after five years. This information was disclosed in a bond prospectus released on the Shanghai Clearing House website over the weekend.

ICBC stated that the proceeds from the TLAC bond issuance will be utilised to enhance the bank's total loss-absorbing capacity. The issuance period is set to run from Wednesday to Friday.

TLAC bonds, which do not contribute to a bank's capital base, can either be written off or converted into common equities when the bank enters the disposal phase. As designated global systemically important banks, ICBC and four other major Chinese state banks are intensifying efforts to comply with stricter global regulatory requirements on capital buffers.

Despite unveiling plans this year to issue a total of 440 billion yuan of TLAC bonds to address capital shortfalls, these banks are estimated to face a TLAC shortfall of 1.6 trillion yuan by January 2025, according to Fitch Ratings.

(With Reuters inputs)