Pudong Bank bond sale targets 9b yuan
Subordinated debt sale to lift capital adequacy
Shanghai Pudong Development Bank, in which Citigroup owns a stake, said it planned to sell up to nine billion yuan of subordinated bonds to improve its capital adequacy level and fund further expansion.
The latest bond issue is part of the Shanghai-listed bank's plan to raise 19 billion yuan through external financing this year to improve its capital adequacy ratio - a measure of a bank's strength - to this year's target of more than 10 per cent.
By the end of March, the bank's capital adequacy ratio was 9.02 per cent due to increased loans. The officially required minimum ratio is 8 per cent in the mainland.
Proceeds from the sale will allow it to further expand credit card and other loans.
The lender also said yesterday it expected net profit to increase 30 per cent to between 4.35 billion yuan and 4.4 billon yuan this year, compared with 3.35 billion yuan last year.
'We will further tighten risk control, keep the bad debt under 1.8 per cent and maintain a stable capital reserve,' the lender said in a statement filed with the city's stock exchange.
The nine billion yuan of subordinated bonds would have a maturity of longer than five years, the bank said, without disclosing more details.
The 14-year-old bank posted strong first-quarter earnings growth on increased loans and a boost in interest margin after the central bank raised lending rates twice this year.
It is benefiting from increased consumer and corporate demand for loans in an economy whose growth accelerated to more than 11 per cent in the first quarter.
Bank lending on the mainland was 1.4 trillion yuan in the first quarter - almost half of last year's total.
Pudong Bank, which has 370 branches around the nation, was established in 1993 in Shanghai by the local government.
By the end of last year, the bank's total assets had reached 689 billion yuan.
It raised six billion yuan from a secondary share placement in November.
In 2005, the bank sold 12 billion yuan of financial bonds, its largest fund raising.
'The bank has a stable business style and its strong ability of profit making can help it offset risks,' said Shanghai Far East Credit Rating in 2005 when it assigned an AAA rating to the financial bonds.
In the event of bankruptcy, subordinated debt holders receive payment only after senior debt claims are paid in full.
Mainland banks are selling more fee-based products, including funds, as the surging stock markets and the country's rising income generate demand.
Shares of Pudong Bank have gained 31 per cent this year, lagging behind the 85 per cent rally of the benchmark CSI 300 Index.
The price of the bank's share closed down 0.72 per cent at 27.74 yuan yesterday.
