Minsheng placement taps shareholders for 21.5b yuan

PUBLISHED : Saturday, 08 January, 2011, 12:00am
UPDATED : Saturday, 08 January, 2011, 12:00am

China Minsheng Banking Corp is looking to raise 21.5 billion yuan (HK$25.21 billion) through a private placement of A shares to boost its capital adequacy ahead of the expected introduction of higher capital requirements.

The Beijing-based lender said in a statement it would place 4.7 billion A shares to seven shareholders including China Life Insurance and Sichuan South Hope Industrial at 4.57 yuan a share, which represented a discount of 9.1 per cent to the stock's close of 5.03 yuan on Thursday.

All the proceeds raised from the placement would be used to replenish its capital. The placement is subject to shareholders' and regulators' approvals.

The fund-raising comes 14 months after the bank's listing in Hong Kong, which netted more than HK$30 billion.

'The banking regulator will heighten capital levels required of banks,' Shenyin Wanguo Securities analyst Li Yamin said. 'Those banks with the need to boost capital have to seek fresh funds ahead of the official announcement [of a higher capital requirement].'

The China Banking Regulatory Commission said earlier it would raise the capital requirement in line with the global Basel III accord reached in September last year, which required banks to increase tier-1 capital ratio to 8.5 per cent from 4 per cent.

Tier-1 capital ratio is the ratio of a bank's core equity capital to its total assets.

Minsheng, which said last year it had no need to raise extra funds in the near future, reported tier-1 capital adequacy ratio of 8.1 per cent at the end of September.

Analysts said other medium-sized banks such as China Merchants Bank and Shenzhen Development Bank were also expected to sell shares to raise fresh capital.

China Merchants' tier-1 ratio stood at 8.03 per cent in September while Shenzhen Development reported a ratio of 7 per cent.

Mainland banks faced mounting concerns over bad debts after they granted a record 9.6 trillion yuan in loans in 2009. The lending binge continued last year with an expected 7.5 trillion yuan in loans extended.

In order to cover potential soaring bad loans and support new lending growth, all of the country's Big Four banks resorted to the stock markets to raise fresh capital last year.

Agricultural Bank of China completed a US$22.1 billion dual listing in Shanghai and Hong Kong, the world's biggest-ever initial public share offering.

In November, Industrial and Commercial Bank of China, the last of the Big Four to raise funds on the stock markets, completed a 45 billion yuan rights issue.

Mainland investors appear more cautious on the banking sector's outlook than their global counterparts. A-share banking stocks are now trading at a discount to H shares.

Minsheng's A shares closed at 5.03 yuan on Thursday before trading was suspended yesterday. The H shares last traded at HK$6.59.

By the book

Minsheng needs a capital adequacy ratio of 8.5 per cent under new rules

In its last fund-raising through a listing in Hong Kong, Minsheng netted, in HK dollars, more than: $30b