Case Study Of Bank Of Nanjing’s Issuance Of Convertible Bond Financing

In recent years,due to the downward pressure on the economy,commercial banks in China have faced many difficulties in their operations.The rise in the non-performing loan ratio has made the shortage of core capital become the primary problem that commercial banks need to solve,especially for city commercial banks.At the same time,convertible bonds,a new financing tool,have become increasingly favored by listed banks because of their advantages such as low financing costs,loose issuance conditions,and the ability to supplement core tier-one capital after conversion.In 2021,five listed banks issued convertible bonds,raising a total of RMB 110 billion,four of which were city commercial banks.Bank convertible bonds have become the largest type of convertible bond in the current Chinese market.This article takes Bank of Nanjing as the main research subject and selects the Bank of Nanjing Convertible Bond issued on June 15,2021,with a scale of RMB 20 billion as the research object.The research is conducted from three aspects: the motive for Bank of Nanjing to issue convertible bonds,the theoretical value of the Bank of Nanjing convertible bond,and the effect after the Bank of Nanjing issued the convertible bond.Among them,the motive aspect is discussed from both the macro and micro levels,and the theoretical value aspect is analyzed using the B-S options pricing model.The effect aspect examines the short-term market effect and financial effect of the Bank of Nanjing convertible bond and evaluates its comprehensive effect using factor analysis.Through research and analysis,it was found that Bank of Nanjing chose a good timing for the issuance,obtained a part of the issuance premium,and promoted the rise of Nanjing Bank’s stock price in the short term.However,the bank’s profitability and overall effect level showed a certain degree of decline after the issuance.At the same time,although the unconverted convertible bonds could expand the credit scale to a certain extent,their role in supplementing core tier-one capital and improving capital structure was limited.Based on the research conclusions,this article puts forward corresponding suggestions,hoping to provide reference for other listed city commercial banks to choose appropriate refinancing methods through this case analysis.