Industrial and Commercial Bank of China started its HK$13 billion H-share rights issue yesterday, hoping to raise up to 45 billion yuan (HK$ 52.3 billion) to prepare for loan risks and meet capital regulations.
'Based on our performance in the past year, we have confidence that we will meet the China Banking Regulatory Commission's capital ratio standards,' said Hu Hao, the newly appointed board secretary of ICBC.
The world's largest bank in terms of market capitalisation saw a record 99.72 per cent subscription ratio in its A-share rights issue that closed last week.
Hu said that by the end of this year, ICBC's core capital adequacy ratio - which includes equity capital and disclosed reserves - would reach 10 per cent, up from 9.33 per cent in September, and the bank's overall capital adequacy ratio would reach 12 per cent, up from 11.57 per cent in September.
Basel III regulations announced in September require banks to have a minimum 4.5 per cent common equity capital ratio, a 6 per cent core capital ratio and an 8 per cent total capital ratio.
Though it will be finalised in January, the general understanding is that the China Banking Regulatory Commission will set capital adequacy ratios for mainland banks that are even higher than those stipulated by Basel III. According to Michael Werner, senior banking analyst at Sanford C. Bernstein & Co, they will probably be 200 basis points higher.
'I don't think ICBC needs to raise capital to meet the new requirements,' said Werner. 'Just like you want to look as good as possible for holiday photos, ICBC wants to raise capital before year-end so it can print its balance sheet in its 2010 annual report with a stronger capital base.'