China Construction Bank Corp, the world's second-largest lender by market value, plans to complete a share placement of up to 75 billion yuan (HK$85.7 billion) in Shanghai and Hong Kong this year. The lender, now awaiting approval from the China Securities Regulatory Commission, will 'watch [for a] market window' to make the placement to minimise the impact, chairman Guo Shuqing said yesterday. 'The Hong Kong market will be more affected than the A-share market because 96 per cent of the shares will be sold in Hong Kong,' said Guo. The bank will offer 0.7 share for every 10 held, or as many as 630 million shares, in Shanghai and about 15.7 billion shares in Hong Kong under the fund-raising proposal unveiled at the end of April. Guo said the lender also plans to sell subordinated debt in the future and keep the capital adequacy ratio above 11.5 per cent in the next three years. The bank's capital adequacy ratio was 11.68 per cent at the end of June, higher than the 11.44 per cent three months earlier and the 11.5 per cent minimum required by the mainland banking regulator. All major mainland lenders have revealed massive fund-raising plans this year after a huge 9.6 trillion yuan of new loans were made last year, which eroded their capital bases. A large part of the loans went to the financial vehicles of local governments to help the economy recover from a slowdown caused by the financial crisis. Analysts are concerned some of the loans may turn sour in the next few years, owing to the questionable practices of some local governments. China Construction Bank had 580 billion yuan of outstanding loans to such vehicles at the end of June, with 23 per cent of those loans unsecured, Guo said. The debts carry a 'very small' risk, and the current non-performing loan ratio was 0.11 per cent, he said. Board secretary Chen Caihong said a government order to transfer off-balance-sheet trust-loan wealth management products back onto banks' books would not affect the lender's finances very much. China Construction Bank had 180 billion yuan of such loans outstanding on June 30, of which 120 billion yuan would mature by the end of next year, Chen said. China's banking regulator has ordered lenders to move such loans back to their books to enhance supervision of the loans. The bank posted a 20 per cent gain in profit in the second quarter, underpinned by strong fee income and better cost controls. 'Construction Bank is the state lender with strongest earning capacity,' said Li Yamin, an analyst with Shenyin and Wanguo Securities. 'It has lower non-performing loans compared with peers. We expect its net profits to grow 19.5 per cent this year and 25.8 per cent next year.' Market impact Hong Kong is likely to get 15.7 billion shares in the fund-raising proposal All mainland lenders have unveiled massive fund-raising plans this year after making loans last year of, in yuan: 9.6tr yuan
