ICBC joins the rush to raise new capital

PUBLISHED : Friday, 30 July, 2010, 12:00am
UPDATED : Friday, 30 July, 2010, 12:00am


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Industrial and Commercial Bank of China, the world's largest lender by assets, said it would raise up to 45 billion yuan (HK$51.48 billion) via a rights issue in Shanghai and Hong Kong, following fund-raising efforts by its Chinese peers.

ICBC's board has passed a proposal to sell up to 0.6 shares for each 10 shares held by existing shareholders to replenish capital, according to a bourse filing on Wednesday. The plan is subject to approvals from shareholders and regulators.

The rights offer would bring total fund-raisings announced by the largest lenders - ICBC, China Construction Bank, Bank of China and Bank of Communications - to as much as 287 billion yuan.

The fund-raising flood comes on the heels of last year's lending binge. After banks lent an unprecedented 9.6 trillion yuan, they now have to strengthen their capital bases to meet regulatory requirements.

At the end of March, ICBC's capital adequacy ratio stood at 11.98 per cent, higher than the 11.5 per cent minimum required by the China Banking Regulatory Commission.

The ICBC board of directors on Wednesday also passed a plan to privatise Industrial and Commercial Bank of China (Asia), which is a 72.4 per cent-owned subsidiary.

Analysts with Citi Investment Research estimate that the deal, which is intended to streamline ICBC's Hong Kong businesses, would cost ICBC US$1.6 billion if the stake is priced at 2.5 times 2009 book value.

ICBC sold a 75 per cent stake in brokerage ICEA Finance Holdings to Bank of East Asia at the beginning of this year and bought a 70 per cent stake in BEA (Canada). In Hong Kong, ICBC has a wholly owned investment bank, ICBC International.

Analysts with Guotai Junan Securities estimate that the rights issue will be priced at HK$2.57, 56 per cent lower than the Tuesday closing price of HK$5.87.

The analysts do not expect the fund-raising to have a major impact on the market, predicting that Central Huijin Investment, a major shareholder of ICBC and a subsidiary of the nation's sovereign wealth fund China Investment Corp, would probably subscribe to the shares.

Separately, Agricultural Bank of China may topple ICBC as the company with the world's biggest IPO if it chooses to exercise a greenshoe option. ICBC completed the world's top initial share sale in 2006 when it raised US$21.9 billion.

ABC raised US$19.2 billion in an IPO earlier this month, and boosted the size to about US$20.8 billion after selling a further 3.81 billion shares at HK$3.20 a share, it said yesterday.