China Minsheng Banking Corp., the nation’s first non-state lender, aims to sell about 30 billion yuan ($4.6 billion) of stock and debt, a person with knowledge of the matter said.
The bank will raise 40 percent more than previously planned by selling about 21 billion yuan of convertible bonds in Shanghai and 9 billion yuan of shares in Hong Kong, the person said, declining to be identified before a public announcement. The company’s board approved the plan today, the person said.
Minsheng Bank Chairman Dong Wenbiao is trying to bolster a capital adequacy ratio that’s the second-lowest among nine Chinese banks traded in Hong Kong. The lender scrapped a plan to raise 21.5 billion yuan in a private placement in Shanghai because of opposition from small shareholders, the person said.
“The new plan is more likely to be accepted by investors and can sustain Minsheng’s growth for at least three years,” said Li Wen, a Beijing-based analyst at Donghai Securities Co. “Demand for convertible bonds, especially from fixed-income funds, is quite strong.”
Shares of Minsheng Bank were suspended from trading today. The stock closed at 5.09 yuan in Shanghai yesterday, about 10 percent below than its HK$6.72 price in Hong Kong. Minsheng trades at 1.4 times estimated book value for 2010, trailing the average 1.54 times for rivals listed in Hong Kong, data compiled by Bloomberg dhow.
The company’s proposed private placement in Shanghai would have been priced at 4.57 yuan a share, 10 percent below yesterday’s close. Minsheng changed its fundraising plan because it can sell stock in Hong Kong more quickly, and demand for convertible bonds in China is strong, the person said.
Li Limin, a Beijing-based press officer at Minsheng Bank, declined to comment.
Dong, 53, may still risk the ire of investors as he reneges on a promise made in November 2009, after the bank raised $3.9 billion in a public offering in Hong Kong, that Minsheng Bank wouldn’t sell more equity for three years.
Minsheng Bank was forced to raise more money after regulators told the lender to boost its capital ratio by two percentage points, Shanghai Securities News reported Jan. 12, citing Dong.
“If we don’t refinance, that means we are not obeying orders, and then we won’t be able to open for business next year,” the newspaper quoted Dong as saying.
Minsheng Bank’s capital adequacy ratio fell to 10.77 percent at the end of June from 10.83 percent six months earlier. While that’s still above the regulatory minimum, China may raise the ratio for lenders including Minsheng to as high as 13 percent when credit growth is deemed excessive, a person with knowledge of the matter said last month.
The company’s stock has slumped 13 percent in Hong Kong trading since the 2009 offering. In Shanghai, Minsheng declined 24 percent last year, compared with a 14 percent drop in the benchmark Shanghai Composite Index.
The lender, which has about 460 outlets and 176 billion yuan of assets, 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 46 percent since 2007.
China’s banking regulator said this week it is drafting new capital regulations based on the global Basel III agreement and plans to announce them as soon as possible.