On March 22, Postal Savings Bank of China (PSBC) announced on ChinaBond.com that it finished issuing its 2021 perpetual capital bonds (Issue No. 1) with the value of 30 billion yuan (about 4.56 billion US dollars) and the coupon rate of 4.42% on March 19.
Perpetual capital bonds are an important tool for commercial banks to replenish capital. The issuance of 2021 Postal Savings Bank of China Perpetual Capital Bonds (Issue No.1) has several features. First, the issuer enjoys good qualifications. In the credit rating conducted by China Chengxin International Credit Rating Co., Ltd. (CCXI), both the issuer and the issue ratings of this bond are AAA. Second, the issuance of the bond itself is market-oriented with the active subscription of diversified investors, including about 120 institutional subscribers such as large state-owned banks, joint-stock banks, city commercial bank, rural commercial banks, insurance companies, securities companies, fund companies, wealth management subsidiaries of banks, finance companies, etc., applying for 3.09 times the bonds available, a record high among recent comparable bonds. Third, the interest rate and interest rate spread were the lowest among recent comparable bonds. Under market-based pricing, investors actively participated in the subscription. Consequently, the interest rate of the bonds was 4.42%, and the interest rate spread was 102BPs compared with the yield to maturity of the five-year CDB (China Development Bank) bonds on the same day, both reaching a new low among perpetual capital bonds issued by large state-owned banks and joint-stock banks since August 2020.
According to the offering circular, the funds raised from the issuance of the bonds can increase the capital adequacy ratio of PSBC by about 0.54 percentage point, which will further reinforce the capital strength of the bank and improve its capability of serving the real economy.