Industrial & Commercial Bank of China Ltd., the nation’s largest lender by market value, is seeking to raise as much as 80 billion yuan ($12.9 billion) selling preferred stock in China and offshore, it said in a Shanghai stock exchange statement yesterday.
Its board approved a plan to sell as many as 450 million preferred shares through private transactions on the mainland and no more than 350 million preferred shares offshore, the Beijing-based lender said in the statement. The bank plans to replenish its capital by the share sales, it said.
The proposed sale follows that of Ping An Bank Co. (000001), a unit of China’s second-largest insurer, which last week said it would raise as much as 30 billion yuan in a sale of preferred shares and common equity. Stricter requirements introduced by the government in 2013 mean China’s four biggest banks will face a capital shortfall of $87 billion under the new rules by 2019, Mizuho Securities Asia Ltd. estimated in a March report.
Preferred shares, available under a trial program approved by regulators in March, permit banks to raise capital without selling common equity. The securities that are issued by banks through private placements can be converted into common stock if capital ratios fall below a certain level.
Chinese lenders including Bank of China Ltd. and Agricultural Bank of China Ltd. this year have announced plans to raise a total of about 300 billion yuan by selling securities, mostly preferred shares.
ICBC shares rose 0.2 percent to HK$5.2 at the close of trading in Hong Kong today before the announcement.
Combined profit at the four biggest Chinese banks rose 12 percent last year, slowing from a 15 percent increase in 2012. Declining earnings growth and rising defaults at the largest lenders have curbed their ability to retain earnings to fulfill capital requirements.
China’s systemically important banks may see their capital adequacy ratio fall to 10.5 percent in the event bad loans surge fivefold, according to a stress test by the nation’s central bank in April.
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