China Minsheng Banking Corp. (1988), the nation’s first non-state lender, plans to raise about HK$11.2 billion ($1.4 billion) in a Hong Kong share sale to shore up capital amid tightened rules for risk buffers.
The Beijing-based bank is offering 1.65 billion shares at HK$6.79 apiece, representing a discount of 5 percent from its last closing price on March 23, according to a statement today. Minsheng fell 2.5 percent to HK$6.97 in Hong Kong trading as of 9:35 a.m., after dropping as much as 3.8 percent, the biggest intraday decline in three months.
Minsheng joins local rivals Bank of Communications Co. and Industrial Bank Co. (1398) in seeking funds after a two-year, $2.7 trillion lending spree drained their finances. China’s banking regulator is planning tougher capital requirements for lenders to fend off rising credit risks.
The China Banking Regulatory Commission said in August that it would require the country’s largest, or so-called systemically important, lenders to have a minimum capital adequacy ratio of 11.5 percent by the end of next year. Smaller banks would be required to have at least 10.5 percent under “normal conditions” by the end of 2016, the CBRC had said.
Minsheng’s capital adequacy ratio stood at 10.86 percent as of Dec. 31, while the core ratio was 7.87 percent. Both are the lowest among the nine publicly traded Chinese lenders listed in Hong Kong.
The share sale may boost Minsheng’s Tier-1 ratio by at least 55 basis points to 8.42 percent, according to an estimate by Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd. The bank is required to achieve a Tier-1 ratio of at least 8.5 percent by 2016.
In February 2011, Minsheng said it planned to issue as much as 20 billion yuan ($3.2 billion) of convertible bonds in Shanghai and sell as many as 1.65 billion new H-shares in Hong Kong to replenish core capital.
The proceeds from the share sale will be used to improve the capital adequacy ratio, according to today’s statement.
The lender, which has about 590 outlets nationwide, was founded in 1996 by pig-feed tycoon Liu Yonghao and some of China’s wealthiest businessmen. The bank has boosted profit by an average 50 percent since 2007 by focusing on smaller enterprises. Profit surged 59 percent to 27.9 billion yuan last year on higher income from lending and fee-based services.
China’s publicly traded lenders have raised about $87 billion from equity markets since 2010. Credit extended to local governments and property developers to support a 4 trillion-yuan stimulus package sapped their financial strength.
Shanghai-based Bank of Communications said on March 15 it plans to raise 56.6 billion yuan in the world’s biggest share sale since May. Industrial Bank, a Chinese lender part-owned by Hang Seng Bank Co., said earlier this month it will raise as much as 26.4 billion yuan in a private placement.
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