Merchants Bank raises 27b yuan in Shanghai offering
Hong Kong part of sale is expected to complete one of world's top share transactions this year
China Merchants Bank said yesterday it had raised 27.5 billion yuan (HK$34.8 billion) in the Shanghai portion of a rights offer, paving the way for it to complete the world's third-largest share sale this year.
Investors holding 96.4 per cent of the Shanghai-traded shares subscribed to the offer, the bank said in an exchange filing yesterday.
The Shenzhen-based lender said last month it planned to raise 34.8 billion yuan by offering 3.07 billion Shanghai-listed shares at 9.29 yuan each and 680.4 million Hong Kong shares for HK$11.68 each. The result of the Hong Kong sale will be announced on September 26.
The sale will help the mainland's sixth-largest lender, meet capital needs over the next five years, speed up growth and cope with growing competition from rivals such as China Minsheng Banking and Industrial Bank.
Mainland lenders have announced plans this year to raise as much as 327 billion yuan from bond and equity offerings as the industry regulator tightens capital rules and policymakers crack down on short-term financing.
Shares of Merchants Bank rose 0.42 per cent to close at HK$14.44 in Hong Kong yesterday, bringing their decline for the year to 13.6 per cent. The stock, suspended in Shanghai since Wednesday of last week, will resume trading there today.
Merchants Bank's capital adequacy ratio fell to 10.72 per cent at the end of the second quarter from 11.41 per cent at the beginning of the year, and its core tier-1 ratio dropped to 8 per cent from 8.34 per cent, according to its first-half earnings report.
While both measurements are higher than the minimum regulatory requirement, they are the second-lowest among Hong Kong-listed mainland lenders.
Merchants Bank plans to improve its tier-1 ratio to 9.5 per cent and total ratio to 11.5 per cent by the end of 2015, bank president Tian Huiyu said last week.
The lender in June applied to issue 11.3 billion yuan of new capital instruments to replace subordinated bonds that mature this month and to boost supplementary capital.
It reported a 13 per cent increase in second-quarter profit to 13.3 billion yuan. But its earnings growth for the full year may slow to 4.8 per cent from an average of 36 per cent in the past three years, according to consensus analyst estimates in a Bloomberg survey.
Larger lenders Industrial and Commercial Bank of China, China Construction Bank and Bank of China have announced plans to raise as much as 60 billion yuan each from new tier-2 capital instruments.
Agricultural Bank of China plans to sell 50 billion yuan of similar debt, and raise a further 40 billion yuan to boost tier-1 capital.