Ka Wah rights issue will provide $755m to fund expansion plans

Ka Wah Bank, which is 61.3 per cent owned by China International Trust & Investment Corp (Citic), has foreshadowed further expansion by announcing it will raise up to $755.3 million through a rights issue.

The issue, on the basis of 19 rights shares for every 100 shares held, has been pitched at $3.15 a share - a discount of about 6 per cent to the bank's close of $3.35 last Friday.

The rights price is also at a 5.1 per cent discount to the theoretical ex-rights price of about $3.32 per share.

Yesterday, the bank said that in the past it had been able to boost its capital base to meet capital adequacy requirements under the Banking Ordinance through profit retention and capitalisation of reserves through bonus share issues.

Directors believed the time was right to bolster capital further through a rights issue.

This would facilitate expansion of the banking business and 'any additional areas which the company may consider profitable'.

'While the company is well within the required capital adequacy ratio, it takes a conservative approach to the maintenance of this ratio and the directors believe the expansion of the company's capital base will create an important platform for the long-term development of its banking business,' the company said.