Bank of Beijing Poised for $4 Billion Hong Kong Share Sale

Bank of Beijing Co. is planning what may be Hong Kong’s biggest first-time stock sale since 2010 while Shanghai Pudong Development Bank Co. said it’s seeking as much as 30 billion yuan ($4.8 billion) in capital as more stringent requirements force Chinese lenders to raise funds.

The board of Bank of Beijing, part owned by ING Groep NV, approved selling as many as 3.4 billion shares, the company said in a Shanghai stock exchange statement yesterday. That could raise as much as 25.8 billion yuan, based on the lender’s closing stock price in Shanghai yesterday. Pudong Bank said today it plans to sell preferred shares to replenish capital.

The sales may ease capital constraints after China introduced stricter requirements in January 2013, posing another challenge for a banking industry that’s facing slower loan growth and rising bad debts. The country’s eight biggest banks may face a shortfall of 680 billion yuan in equity capital by 2019, Mizuho Securities Asia estimated last month.

Shares of the 12 Chinese banks traded in Hong Kong fell by an average 10 percent this year amid weaker earnings prospects and rising loan delinquencies. The stocks were valued at an average 0.8 times book value, near a record low, data compiled by Bloomberg show.

City Lenders

Shares of Bank of Beijing rose 0.3 percent to 7.62 yuan by the close of trading in Shanghai today. The benchmark Shanghai Composite Index climbed 0.8 percent.

Bank of Beijing said it has an over-allotment option to sell 15 percent more shares. A first-time stock sale worth $4 billion would be the biggest in Hong Kong since AIA Group Ltd.’s offering in October 2010, the data showed.

China’s more than 110 city-based banks need funds to compete with rivals that have more capital and no geographic limits on operations. They controlled 13 percent of China’s $20 trillion of commercial-banking assets at the end of March, compared with 77 percent for the country’s state-owned and joint-stock banks, which operate nationwide, according to official data.

Bank of Beijing yesterday reported first-quarter profit increased 9.5 percent to 4.5 billion yuan. Its common equity Tier-1 ratio was 8.81 percent as of Dec. 31, with an overall buffer of 10.94 percent.

The banking regulator requires non-systemically important banks to have minimum common equity Tier-1 ratio of 7.5 percent by the end of 2018 and total adequacy ratio of 10.5 percent.

Pudong Bank aims to raise funds because it expects a capital shortfall of more than 40 billion yuan by the end of 2016, it said in a statement to the Shanghai exchange. Preferred stock, available under a trial approved by regulators last month, permits banks to raise capital without selling dilutive common equity.

Shares of Pudong Bank rose 1.3 percent to 9.80 yuan by the close of trading in Shanghai today. The stock has climbed 3.9 percent this year.

— With assistance by Jun Luo

Before it's here, it's on the Bloomberg Terminal.