China Merchants Bank Co. (3968), the nation’s sixth-largest lender by assets, won approval for the Hong Kong portion of a share sale, clearing the way for what may be the world’s second-largest stock offering this year.
The bank was given permission by the China Securities Regulatory Commission to sell about 680 million Hong Kong-listed shares to existing shareholders, the Shenzhen-based lender said in a statement yesterday. The regulator granted Merchants Bank approval on July 23 to sell 3.07 billion yuan-denominated shares in Shanghai.
The lender said July 22 it planned to raise as much as 35 billion yuan ($5.7 billion) in proceeds. Merchants Bank, which postponed a sale twice because of approval delays, needs to strengthen its capital buffer after regulators tightened requirements and policy makers cracked down on banks’ use of short-term financing.
Merchants Bank’s capital-adequacy ratio stood at 11.41 percent as of March 31 under new capital requirements that took effect at the beginning of this year, with a core Tier-1 ratio of 8.6 percent. While both measurements are higher than the minimum regulatory requirement, they are the second-lowest among nine Hong Kong-listed Chinese lenders.
The sale would improve the bank’s Tier-1 ratio to 9.85 percent, Richard Xu, an analyst at Morgan Stanley, wrote in a report last month. He estimated the Shanghai shares will be priced at 9.4 yuan apiece.
Merchant Bank’s shares in Shanghai lost 1 percent to close at 11.04 yuan yesterday, taking its slump this year to 20 percent. In Hong Kong, the stock rose 1 percent to HK$14.38, narrowing its 2013 loss to 16 percent.
Should Merchants Bank’s share sale raise the maximum amount, the offering would be the second largest this year after a 747 billion yen ($7.6 billion) sale of Japan Tobacco Inc. (2914) shares by the Japanese government in March.
To contact Bloomberg News staff for this story: Jun Luo in Shanghai at firstname.lastname@example.org