Bank of China to boost debt team by 40% amid offshore deal surge

[NEW YORK] Bank of China (BOC) plans to expand its headcount in the offshore bond business by 40 per cent as it fights with global banks for a greater slice of a market that's seen a surge in Chinese borrowers.

The lender is seeking to add 20 more staff to its offshore bond team over the next five years, Hu Kun, its general manager of investment banking and asset management department said in an interview. The bank aims to win more dollar bond deals by Chinese technology giants and also sees rising interest in euro notes by mainland borrowers, he added.

The team has about 50 staff across offices in Hong Kong, Singapore and London, covering deals in Asia, Europe, the Middle East and Africa, he said.

"Our investment in human resources will be based on the rapid growth of the offshore bond market and BOC's overall development layout," Mr Hu said in an interview with Bloomberg. "It is a logical business development."

One of the big four Chinese banks, BOC has kept its top rank in the China offshore bond market since 2016, according to Bloomberg's league table data. Over this period, the dollar bond segment for Chinese issuers has doubled to US$864 billion as the nation's firms sought funding for overseas acquisitions and debt refinancing.

Yet when compared to top international investment banks, Mr Hu said he sees room for the bank to improve its debt capital market-related services, such as settlement, market-making and credit research.

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TECH CHALLENGE

While the bank's strength lies particularly in high-quality Chinese state-owned issuers, big technology firms remain their weak spot, he said.

BOC played a secondary underwriting role as a joint bookrunner on offerings from major tech firms including Tencent Holdings, Baidu and Xiaomi this year, but acted as a global joint coordinator on jumbo deals from the likes of State Grid Corp of China, Bloomberg data shows.

"It is quite a natural choice for tech firms to pick international banks to arrange their bond deals, which sponsored their IPO (initial public offering) in the offshore market," said Mr Hu. "Indeed, as a Chinese bank, we are striving to get more deals from this sector."

He also expects more Chinese firms to issue euro-denominated bonds to expand their funding channels. Chinese borrowers sold 4.63 billion euros (S$7.44 billion) of notes in the third quarter, the highest quarterly amount on record, according to Bloomberg data.

It is likely that Chinese investors will become more willing to buy euro-denominated assets, seeking to diversify from US dollar-denominated asset, given the rising tensions between China and US said Mr Hu.

BLOOMBERG