Issuing CoCo Bond
Shinhan Bank plans to issue contingent convertible (CoCo) bonds worth US$350 million (387.98 billion won) in Europe and Asia.
According to investment banking industry sources on August 7, Shinhan Bank will hold a board meeting at the end of this month and make a final decision on whether to issue CoCo bonds. The company will select three domestic and foreign securities firms to issue the bonds.
In March, Shinhan bank succeeded in issuing CoCo bonds worth US$500 million (554.25 billion won) in the global market for the first time. The bank set its interest rates at 3.875 percent at that time. The bank is unlikely to set the term of redemption of CoCo bonds to be issued this time. Its interest rate of the issuance is expected to be around 3.5 percent.
The BIS capital ratio for Shinhan Bank stood at 15.2 percent as of the end of June. When the bank doesn’t issue securities replacing foreign CoCo bods worth US$350 million (387.98 billion won), which will mature next month, it is highly likely to see its BIS ratio drop below 15 percent. Large financial companies are required to maintain the BIS ratio at 15.5 percent.
In addition to Shinhan Bank, more and more commercial banks are seeking to issue CoCo bonds overseas. Woori Bank already pushed ahead with foreign CoCo bond issue worth US$500 million (554.25 billion won), while Industrial Bank of Korea (IBK) is considering the measures to raise funds from abroad.