Industrial and Commercial Bank of China (ICBC), is in negotiations with Huarong Asset Management (HAM), owned by the Ministry of Finance, over the repayment of CNY313 billion of bonds due as early as this year – reported Bloomberg.
In a telephone interview to the news agency, Gu Shu, board secretary of Beijing- based ICBC, said that HAM sold the bonds a decade ago to ICBC as part of a plan to clean up the country’s major lenders’ balance sheets and recover the soured debts.
Reportedly, the state-owned bad-debt manager has not yet decided whether to pay back the bonds in cash to the bank or roll over the debt, which is guaranteed by the government. James Liu, a Shanghai-based analyst at Sinopac Financial Holdings, commented: “The central government is scrambling to make ends meet this year and they aren’t in a good position to make a full payment on these bonds now.”
However, any delay in repayment is expected to affect the yields for ICBC, whose return on the bonds is lower than the average 3.57% on its securities investments. According to the bank’s semi-annual earnings report, the bonds accounted for around 10% of its securities holdings at the end of June, reported the news agency.
