Moody’s Says China Bank Dividend Cut Will Help Avoid Fundraising

China’s decision to reduce dividend payouts from three of its four largest banks will help avoid “massive” capital raising by lenders this year, Moody’s Investors Service said.

“The more they retain, the less need they will have to go out to the market,” Christine Kuo, a senior credit officer for financial institutions at the ratings company, told reporters in Hong Kong today. “We should see that as a more efficient way to address their capital needs.”

China’s five biggest banks have raised about $120 billion from equity and bond sales over the past three years, according to data compiled by Bloomberg, while paying out as much as half of their profits rather than retaining earnings as capital.

Central Huijin Investment Ltd., the state-backed shareholder in China’s biggest banks, said Feb. 3 that the lenders will lower their dividend payouts to shore up capital.

Dividends will be cut by 5 percentage points to 35 percent of 2011 profit at Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. (939) and Bank of China Ltd. (3988), Huijin said in a statement on its website. The ratio for Agricultural Bank of China Ltd. (601288) will be unchanged at 35 percent, the holding company said.

ICBC, Construction Bank and Bank of China paid out about 40 percent of their 2010 profits as dividends, compared with 44 percent in 2009 and about 50 percent in 2008, according to data compiled by Bloomberg.

To contact the reporter on this story: Stephanie Tong in Hong Kong at stong17@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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