- Lender plans to sell stock to two existing shareholders
- Pudong says facing up to $9.4 billion capital gap by end-2018
Shanghai Pudong Development Bank Co. shares slumped by the most in almost seven months after the lender unveiled plans to raise 14.8 billion yuan ($2.3 billion) in a private share placement to bolster capital.
The stock sank 8.4 percent to 16.89 yuan, the biggest intraday drop since Aug. 24, as of 10:54 a.m. in Shanghai. The shares traded for the first time since Feb. 15, during which the Chinese benchmark financials index gained 3.5 percent.
Pudong Bank plans to issue as many as 921.7 million shares at 16.09 yuan each to Shanghai International Group Co. and Shanghai Guoxin Investment Development Co., the company said in a statement to the Shanghai stock exchange Thursday. The lender will face a capital shortfall of as much as 61 billion yuan by the end of 2018, including a gap of 39 billion yuan in core Tier-1 capital, it said.
The fundraising was part of Pudong Bank’s capital planning for the next three years, during which it expects assets and earnings growth to slow, it said in a separate statement. Its capital-adequacy ratio stood at 12.33 percent at the end of September, lower than the industry’s weighted average of 13.15 percent, regulatory data show.
“The private placement is not a big surprise as the bank’s capital-adequacy ratio has been weak,” said Ma Kunpeng, a Shanghai-based analyst with Sinolink Securities Co. “This should be just an isolated case because the capital position of the industry is still adequate at the moment.”
Shanghai International owns 16.9 percent of the bank, while Shanghai Guoxin holds 2 percent, according to Bloomberg-compiled data. Combining holdings by its other units, Shanghai International will remain the bank’s largest shareholder after the share placement, which will require regulatory approval, Pudong Bank said.
Shanghai International will subscribe to a maximum 621.7 million of the lender’s shares, while Shanghai Guoxin will buy 300 million shares, Pudong Bank said.
The company may issue preferred shares or other new Tier-1 instruments as well as Tier-2 bonds to improve its capital structure, it said, without providing specific targets for those options.
Its fundraising will help keep its capital ratio at a minimum of 12.1 percent by the end of 2018, the lender said.
— With assistance by Aipeng Soo, and Cathy Chan