BANK of China Ltd. (BOC) has begun marketing what may be Asia’s biggest sale of bank capital securities.

    The bank, China’s fourth-biggest lender by market value, plans to sell as much as US$6.5 billion in offshore preference shares to yield 6.875 percent to 7 percent, sources familiar with the matter said yesterday.

    China’s banking giants are shoring up their capital buffers at a record pace as bad loans spike to the highest level since the global financial crisis. Nonperforming loans had touched a five-year high of 694.4 billion yuan (US$113 billion) by June 30, 1.08 percent of total advances, making it more urgent for banks to build capital cushions against losses.

    The bank said it more than doubled the money it set aside for bad loans in the second quarter. It has regulatory approval to issue 40 billion yuan in offshore notes eligible as Tier 1 capital and the entire amount may be sold at once, the sources said. The lender can also sell as much as 60 billion yuan in Tier 2 notes before the end of 2015.

    Bank of China was able to sell the offshore preference shares in either U.S. dollars or euros, according to a preliminary offering circular.

    The deal may boost Bank of China’s common equity Tier 1 capital adequacy ratio to 10.12 percent from 9.7 percent, according to the preliminary offering circular.

    The People’s Bank of China requires the country’s systemically important financial institutions to have a 9.5 percent ratio before the end of 2018. (SD-Agencies)