Case study
CCB’s London dim sum bond issuance
Context
China Construction Bank (CCB) is a leading commercial bank in China providing a comprehensive range of commercial banking products and services. CCB has three principal business segments: corporate banking, personal banking, and treasury operations, and is among the market leaders in China in a number of products and services including infrastructure loans, residential mortgages and bank cards. CCB is the second largest bank in China and also the second largest bank globally by market capitalisation, with its global headquarters based in Beijing, China.
CCB has an extensive customer base, with established banking relationships with many of the largest business groups and leading companies in industries which are strategically important to China's economy. The Bank has a network of over 13,500 branches and sub-branches across Mainland China, and maintains overseas branches in Hong Kong, Singapore, Frankfurt, Johannesburg, Tokyo, Seoul, New York, Ho Chi Minh City and Sydney. CCB has representative offices in Taipei and Moscow, and multiple wholly-owned subsidiaries, such as CCB Asia, CCB Financial Leasing, CCB International, CCB Trust, Sino-German Bausparkasse, CCB London, CCB Principal Asset Management, and CCB Life.
As of December 31st 2012, CCB’s total assets were RMB 13.97 trillion (USD 2.25 trillion), up 13.8% year-over-year. CCB reported 2012 net profit of RMB 193.6 billion, up 14.3% from the same period in 2011. Annualised return on average assets (ROA) and annualised return on weighted average equity (ROE) reached 1.47% and 21.98% respectively. The capital adequacy ratio was 14.32% and core capital adequacy ratio was 11.32%.
Issuing the dim sum bond in London
CCB places great importance on the development of the London financial market and established a 100% wholly-owned subsidiary, China Construction Bank (London) Limited (“CCBL), in 2009 to fully utilise London’s role as a global financial centre with its competitive advantages in capital, products, technology, personnel and the regulatory environment. In the UK CCBL’s main focus is to provide specialist strategic and financial advisory services to major companies, institutions and clients from China and to European companies with China-related operations. The London-based team supports trade and investment flows between clients in the UK and Europe with Greater China and provides full relationship services.
CCB is a member of the City of London Initiative, which was established in April 2012 to develop London as an international RMB hub. The Initiativebrings together representatives from ten major banks, including CCB, and is supported by HM Treasury, the Bank of England and the Financial Services Authority. Its aim is to deliver a strategy for London to become a centre for RMB products and services, complementing Hong Kong, and seizing some of the significant opportunities which this new market represents.
In November 2012, CCB announced the successful issuance of its first offshore CNY denominated bonds in London, which was issued by a special purpose vehicle held by CCBL. The three-year offshore RMB bonds of CNY 1 billion have an annual coupon of 3.2 per cent., with interest paid semi-annually. A group of investment banks led by CCB International, BNP Paribas, HSBC, and Industrial and Commercial Bank of China (Asia) Limitedserved as joint global coordinators of the bonds. The Bonds were assigned a rating of “A1” by Moody’s Investors Service Limited and a rating of “A” by Fitch Ratings Ltd.
As a result of this bond issue CCB became the first Chinese financial institution to launch offshore RMB bonds in London and list RMB bonds on the London Stock Exchange. Funds raised from the bond sale were used to support the development and expansion of the offshore RMB business of CCBL.Unlike earlier dim sum bond issues in Europe, where the proceeds were immediately swapped into dollars, CCBL’s RMB proceeds were kept in RMB and on-lent to institutions with demand for off-shore RMB.
The success of the bond issuance represents our commitment to the market as a member of the City of London Initiative working group and will effectively promote the development of the offshore RMB market in London.
Plans and practical implications for the future
China Construction Bank is keen to support the development of the offshore RMB market in London and has actively engaged in developing this market, with cross-border RMB business a strategic focus. Through utilising the competitive advantages of its global network for RMB settlement, China Construction Bank has developed its cross-border RMB business and expanded this business to more than 120 countries and regions. Going forward, China Construction Bank will continue to be committed to internationalization of the RMB and the development of the offshore RMB market, including London.
Case study
CCB’s London dim sum bond issuance
CONTACTS
For more information please visit www.cityoflondon.gov.uk/renminbi or email china@cityoflondon.gov.uk
