Despite the financial regulator’s message warning against a concentration of bank bond supply and demand at year-end, banks are instead accelerating their issuance pace. This reflects an effort to secure funding preemptively before market rates rise further.
In just three months since the start of the second half, issuance volume has reached 70% of the first-half level. With nearly 50 trillion won in bank bonds maturing by year-end, refinancing demand is expected to persist.
According to financial industry sources on the 14th, the Financial Services Commission received Q4 bond issuance plans from banks earlier this month. This was a follow-up measure after the regulator had previously conveyed a message urging caution against a concentration of bond market issuance at year-end.
Lee Eui-woon, chairman of the Financial Services Commission, recently said at a financial market situation review meeting, “We will conduct a preliminary check on the issuance scale and maturity structure of bank bonds, finance company bonds, etc., in Q4, and carefully examine the asset soundness, liquidity response capacity, and funding structure of the financial sector during the period of rising interest rates.”
As of Oct. 9, this year’s bank bond issuance volume stands at 201.788 trillion won, already exceeding 1.5 times last year’s total issuance (131.12 trillion won). In particular, over approximately three months in the second half, banks have issued 83.98 trillion won in bank bonds, reaching 70% of the first-half issuance amount (118.69 trillion won).
By month, September recorded the highest issuance volume this year at 26.418 trillion won. Even in October, following the regulator’s message, approximately 8 trillion won worth of bonds were issued within five business days, indicating accelerating momentum.
By bank, Woori Bank, Shinhan Bank, KB Kookmin Bank, and Jeonbuk Bank have already surpassed their first-half issuance volumes. Among these, Kookmin Bank and Shinhan Bank have exhausted their committed issuance limits. Hana Bank, iM Bank, and the Export-Import Bank of Korea have also exceeded 90% of their first-half issuance amounts.
Despite the regulator’s request for volume adjustment due to concerns over market instability, banks are rushing to issue bonds. The primary reason is concern that additional interest rate hikes will increase funding costs. Yields on one-year and five-year bank bonds have risen by 1.176 percentage points (P) and 0.848 P, respectively, compared to the end of last year. With the Bank of Korea maintaining its interest rate hike stance, cost burdens are inevitably increasing, prompting preemptive action.
For some banks, the outflow of large corporate deposits in the second half had an impact. It was explained that when the maturities of time deposits held by Samsung Electronics and SK Hynix came due, the banks raised funds through bond issuance as a liquidity management measure.
Issuance demand is not expected to ease easily until year-end. Kookmin Bank, which exhausted its limit early, newly reported an increase of 6 trillion won in its year-end issuance plan. Shinhan, Hana, and Jeonbuk Bank disclosed their full-year issuance plans upon entering the second half and received new limits.
Most importantly, a significant volume matures at year-end. Bank bonds maturing in Q4 this year are estimated at 69.1823 trillion won. Maturities totaling 49.936 trillion won will come due in just the two months of November and December. In fact, looking at last year’s pattern, issuance volume reached its annual peak in November.
A financial industry official said, “There are many market-based funding maturities, so there is an atmosphere of staking everything on issuance starting from early October as a preemptive measure.”
in FINANCE
