ICBC
There is no denying that Industrial and Commercial Bank of China is a volume house, just like its Chinese big four peers. During our awards period of June 1, 2018 to May 31, 2019, ICBC ranked first among all banks in terms of domestic bond underwriting, with a volume of Rmb1.36 trillion ($191 billion) and a 12.3% market share, according to Wind.
It was an absolute leader in local government, policy bank and financial bonds, as well as bonds by government-supported institutions such as Central Huijin Investment and China Railway, while staying competitive in other areas including medium-term notes.
But there is much more to the bank’s debt capital markets business than just volume. ICBC was repeatedly mandated by high-quality Chinese issuers, underwriting five deals worth Rmb36 billion for Central Huijin during our awards period, eight bonds totalling $80 billion for China Railway, four offerings equal to $40 billion for PetroChina, and both senior and subordinated notes for China Minsheng Banking.
It was also involved in some of the highest-profile transactions in the market, including the Rmb50 billion issuance from Shanghai Pudong Development Bank in support of small and micro enterprise financing, and Rmb18 billion of capital replenishment bonds by PICC (the People’s Insurance Company of China). It helped China Orient Asset Management to price with record low yields in its three- and 10-year outing in July 2018, before taking it to debut in the five-year part of the curve in August.
ICBC not only won repeat mandates, but also worked closely with first-time issuers in the interbank market, including the government of Xiong’an New Area, ICBC Financial Asset Investment, Chinese Merchandise Bank, Shanghai Airport (Group), and Zhongjin Tongsheng Commercial Factoring.
In securitization, ICBC worked with some of the biggest and most sophisticated originators in China such as Bank of Communications on a number of its residential mortgage-backed securities and credit card asset-backed securities, while being selected by foreign and joint venture originators such as BMW Auto Finance (China) and Dongfeng Nissan Auto Finance for their auto loans-backed ABS.
It was the lead underwriter for China Longyuan Power Group’s Rmb1.01 billion three-year green asset-backed notes, the first deal in China backed by the income rights of government subsidies for renewable energy companies.
In addition, ICBC itself is also one of the most active originators, issuing credit ABS, residential mortgage-backed securities and non-performing loans securitizations.
Longyuan Power was, however, just one of the many examples of ICBC’s commitment to promoting green financing for Chinese issuers. During our awards period, the bank lead underwrote eight green bonds worth a total Rmb75.4 billion for names including Industrial Bank and Bank of Jiangsu, pricing Industrial Bank’s Rmb60 billion green notes at the lower end of the issuer’s expectation while achieving a twice-covered order book, despite the large deal size.
The bank was actively involved in credit risk mitigation warrants, and helped six private enterprises in seven bond issues. It was also one of the most active banks in panda bonds, underwriting 17 transactions for issuers including New Development Bank.
Despite the large amount of deal volume and increased competition in the market, ICBC never lowered the bar for internal credit risk control when it came to DCM underwriting, and had considerably lower default rates in the bonds it underwrote in comparison with some other large Chinese banks.