China Merchants Bank Co. may give terms of a 35 billion-yuan ($5.7 billion) share sale on Aug. 16 when it publishes earnings, Apple Daily reported today, as the lender prepares this year’s second-largest equity offering.
The bank will offer 1.74 shares for every 10 existing shares, for at least 9.29 yuan each in Shanghai and HK$11.77 in Hong Kong, the Chinese-language newspaper reported, citing unidentified people. Zhang Fan, a Shenzhen-based press officer at the bank, declined to comment on what she called market speculation.
China’s sixth-largest lender by assets, which postponed the sale twice because of delays in approval, needs to strengthen its capital buffer after regulators tightened requirements and as policy makers crack down on banks’ use of short-term financing. It won approval from the China Securities Regulatory Commission on July 23 for the Shanghai portion of the offer.
“Investors will be relieved to see Merchants’ capital overhang finally addressed,” Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd., wrote in a note today, upgrading the shares to neutral from underperform. “This name could rally over the next few months” if the bank reports strong second-quarter earnings.
China Merchants shares rose 7.2 percent to HK$14.24 at 2:49 p.m. in Hong Kong, their biggest intraday gain since December 2011. The stock gained 0.9 percent to 11.15 yuan in Shanghai.
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.