China Citic Bank Corp shares fell in Hong Kong and Shanghai yesterday after the lender announced plans to raise up to 26 billion yuan (HK$29.76 billion) in a rights offer. The banking unit of the nation's largest investment firm fell 2.7 per cent to HK$5.09 in Hong Kong and 1.7 per cent to 5.64 yuan in Shanghai after the mid-sized lender disclosed a 2.2-for-10 rights issue for both H and A shares to replenish capital. The Hang Seng Index slipped 0.89 per cent yesterday, while the Shanghai Composite Index declined 1.2 per cent. The Beijing-based bank, about 15 per cent owned by Spain's BBVA, has set the preliminary date of the share sale in the first quarter of next year and has the support of its foreign stakeholder, the bank's vice-president Cao Tong said yesterday. The bank's move comes on the heels of mainland rivals to raise funds after a lending spree last year to support Beijing's economic stimulus eroded their capital base. At the same time, the banking regulator has increased the capital adequacy ratio requirements to cushion against a rise in bad loans. Citic Bank's capital adequacy ratio improved by 23 basis points to 10.95 per cent over the first half of this year after the bank issued 16 billion yuan in debt. The banking regulator requires small and medium-sized lenders to meet a 10 per cent ratio as the lowest. 'The implied subscription price would be 3.03 yuan per share - or 36 per cent discount to the last closing H-share price,' Credit Suisse analysts said in a note to clients. The share price is likely to face pressure because the bank's management earlier denied that it would raise equity capital this year and the market expected no such plan would even be disclosed this year, according to the Credit Suisse note. Analysts with China International Capital Corp expect the fund-raising to lift the bank's core 2011 capital adequacy ratio by 1.5 per cent and support its business development for four to five years. Citic Bank's net profit surged 45 per cent from a year earlier to 10.7 billion yuan in the first half, according to its interim report released on Wednesday. The CICC analysts said the profit was 12 per cent above their expectations, mainly due to 'improving asset quality and sound cost control'. The non-performing loan ratio dropped 0.14 percentage point to 0.81 per cent at the end of June. Vice-president Zhao Xiaofan said the bank's bad loan ratio would remain stable or drop in the second half of the year.