China Merchants Bank Raises $1 Billion in H.K. Share Sale

China Merchants Bank Co. (3968), the nation’s sixth-largest lender, raised HK$7.95 billion ($1 billion) in a Hong Kong rights offer following a share sale in Shanghai.

Shenzhen-based Merchants Bank made the announcement in a Hong Kong exchange filing yesterday. The lender said on Sept. 4 it sold 27.5 billion yuan of shares in the Shanghai offer as 96.4 percent of local investors participated.

The funding enables Merchants Bank to plug a capital shortfall and accelerate growth as competition with smaller rivals such as China Minsheng Banking Corp. (1988) and Industrial Bank Co. (601166) intensifies. Chinese lenders have announced plans this year to raise as much as 327 billion yuan from bond and equity sales amid tighter capital rules and a government crackdown on short-term financing.

Ping An Bank Co., the least capitalized among China’s 17 publicly traded lenders, said earlier this month it plans to sell 14.8 billion yuan of stock to its controlling shareholder to bolster its financial strength.

Merchants Bank’s capital adequacy ratio fell to 10.72 percent as of June 30 from 11.41 percent at the beginning of the year, and its core Tier 1 ratio dropped to 8 percent from 8.34 percent, according to its first-half earnings report. While both measurements are higher than the minimum regulatory requirement, they are the second lowest among Hong Kong-listed mainland lenders.

The bank aims to improve its capital ratio to 11.5 percent by the end of 2015, while lifting the Tier 1 ratio to 9.5 percent, President Tian Huiyu said last month.

Shares of Merchants Bank lost 0.7 percent to close at HK$14.66 in Hong Kong yesterday, bringing their decline for the year to 12 percent. The bank fell 0.7 percent to 10.76 yuan in Shanghai.

To contact Bloomberg News staff for this story: Jun Luo in Shanghai at jluo6@bloomberg.net

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

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