Pace of loan approvals to stay steady at Bocom

PUBLISHED : Wednesday, 09 June, 2010, 12:00am
UPDATED : Wednesday, 09 June, 2010, 12:00am

Bank of Communications will maintain a moderate pace of loan approvals this year but it expects to raise 33.1 billion yuan (HK$37.7 billion) through a rights issue, executive vice-president Dicky Yip said yesterday.

The mainland's fifth-largest lender still targeted loan growth of 18 to 20 per cent this year in line with the banking regulator's directives, he said at a briefing.

'The bank's current financial situation is strong enough to support our original 18 to 20 per cent loan growth target,' Yip said. 'The rights issue is aimed at replenishing capital and supporting the bank's future expansion and diversification.'

On Sunday, Bocom unveiled a scaled-down fund-raising plan which would net as much as 33.1 billion yuan through a rights issue on the Shanghai and Hong Kong stock exchanges, 20 per cent less than it had sought.

The much-needed refinancing deal could boost Bocom's capital adequacy amid Beijing's tightened supervisions on banks following a lending binge last year.

Mainland banks extended a record 9.6 trillion yuan of loans last year, nearly double the minimum target of 5 trillion yuan. Beijing earlier set a full-year loan target of 7.5 trillion yuan. Last year, the banking regulator also required big lenders to meet the capital adequacy ratio of 12 per cent by 2012, from 8 per cent.

Bocom granted new loans of 510 billion yuan last year, with its outstanding loans topping 18.4 trillion yuan at the end of the year, 38.4 per cent more than at the end of 2008. It planned to extend total credit of up to 370 billion yuan this year.

'As we stick to the original loan target, the fresh capital will be used to help the bank accelerate branch expansion and diversification into other lucrative businesses,' Yip said.

He also said Bocom was looking to consolidate a foothold in Hong Kong and planned to open its first branch in Taiwan as early as possible.

Yip said the bank was waiting approval from mainland officials to set up a representative office in Taiwan, which was likely to be one of the first mainland lenders on the island.

The Shanghai-based bank, nearly a fifth owned by HSBC Holdings, will place 1.5 A shares to every 10 shares held by existing shareholders at 4.5 yuan a piece. The additional H shares will be sold at HK$5.14 each.

The prices, or 1.1 times Bocom's forecast book value for this year, were attractive to investors, analysts said.

Yip said the bank was optimistic the refinancing plan would be a success now that big shareholders including HSBC and the national pension fund had committed to participating in the rights issue.

'The fund-raising deal is needed to boost capital,' Haitong Securities analyst Qiu Zhicheng said. 'At least, a successful rights issue ensures that Bocom can meet the 20 per cent loan target.'

Bocom reported profit of 10.45 billion yuan for the first quarter of this year, up 31 per cent from a year ago.