Nov. 9 (Bloomberg) -- China Minsheng Banking Corp., the nation’s first privately owned lender, plans to raise as much as HK$31.54 billion ($4.07 billion) in Hong Kong’s biggest public sale of shares since April 2007.

Minsheng will sell 3.32 billion new shares, or a 15 percent stake, at HK$8.50 to HK$9.50 each, two people familiar with its plan said yesterday, declining to be identified before an official announcement. Minsheng may increase the number of shares on offer by 15 percent to meet demand, they said.

Chairman Dong Wenbiao is seeking to plug a shortfall in the bank’s capital adequacy ratio, which fell to the second-lowest among the nation’s 14 listed lenders in the second quarter and threatens to stunt profit growth. The planned sale, shelved four years ago because of market conditions, comes as the Hang Seng Finance Index rose 58 percent this year.

“Proceeds from placement will provide the bank with new expansion opportunities,” Grace Li, a Shanghai-based analyst at Shenyin & Wanguo Securities Co., wrote in an Oct. 29 report. She estimates Minsheng’s profit to increase 43 percent in 2009.

Minsheng, founded by 59 private investors including pig- feed tycoon Liu Yonghao, aims to increase profit by at least 40 percent this year to 11 billion yuan ($1.6 billion) after growth slowed to 25 percent in 2008.

The top end of the price range values the Beijing-based bank at 1.8 times its 2010 book value as estimated by banks involved in the sale, the people said. That compares with 3.07 times for China Merchants Bank Co. and 1.79 times for China Citic Bank, two of the six Chinese lenders that currently trade in Hong Kong.

Room to Appreciate

The top end of the Hong Kong share sale price range is about 2.9 percent higher than Minsheng’s closing price of 8.13 yuan in Shanghai on Nov. 6. Yet the price range left the stock room to appreciate a further 15 percent to 20 percent, one of the people said, citing demand feedback from investors.

Five cornerstone investors, including the asset management arm of Ping An Insurance (Group) Co. and Chinese Estates Holdings Ltd., have been guaranteed $340 million worth of shares in exchange for a commitment not to sell their investments for a few months, the people said.

China Citic Bank Co., the banking unit of the nation’s biggest state-run investment company, raised $5.95 billion selling shares in Hong Kong and Shanghai in April 2007. The Hong Kong part of the sale raised HK$32.9 billion after the exercise of an over-allotment.

Loan Growth

Minsheng, with about 400 outlets nationwide, had 1.4 trillion yuan of assets as of the end of September. It expanded lending by 234 billion yuan in the first nine months of this year, up 36 percent from December.

The bank needs as much as 20 billion yuan to boost its core capital adequacy ratio above 9 percent, Liu Minwen, director of Minsheng’s capital financing office, said in June. The bank’s overall capital adequacy ratio stood at 8.48 percent at June 30.

The China Banking Regulatory Commission said in September it has forced lenders whose capital adequacy ratios have fallen close to 8 percent to curb expansion.

BOC International (Holdings) Ltd., China International Capital Corp., Haitong Securities Co., Macquarie Group Ltd. and UBS AG are managing the sale.

Mao Xiaofeng, Minsheng’s Beijing-based board secretary, and the investment banks were either not immediately reachable in their offices yesterday or declined to comment.

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Last Updated: November 8, 2009 11:01 EST