China’s fifth-largest lender, Bank of Communications Company Limited will raise $8.9bn to meet tighter capital requirements by placing shares with existing shareholders such as HSBC and the country’s finance ministry.
Bloomberg News reported on Thursday, that China was set to see a flurry of fund-raising this year, with state-run China Securities Journal saying in December that publicly traded banks were expected to raise more than 100 billion yuan in share offerings.
Besides HSBC and the Finance Ministry, the country’s national pension fund as well as tobacco companies Shanghai Haiyan and Yunnan Hongta will also subscribe to the rights offer.
Under the 56.6 billion yuan private placement, new Shanghai-listed shares will be priced at 4.55 yuan and Hong Kong-listedshares at HK$5.63.
“A private placement is probably ideal under the current circumstances,†an analyst at DBS Vickers in Hong Kong, Mr. Alex Lee, said.
“These are likely to be long-term shareholders, and that removes the likelihood of selling pressure you may get if you have a general rights issue to a more fragmented general audience,â€ÂÂhe said.
The new cash will mean BoCom, which has the lowest capital adequacy ratio of the five largest banks in China, will not pursue any more fundraising in the next 3-4 years, bank executives said in a call with analysts.
HSBC said it would pay about HK$13.2bn for about 2.4 billion new shares from its own cash, bringing its shareholding to no less than its current 19.03 per cent.
“Maintaining our stake in BoCom reinforces our position as the leading foreign bank in mainland China and is consistent with our strategy to deploy capital in faster growing markets,†HSBC Chief Executive Stuart Gulliver said in a statement.
The fundraising will lift BoCom’s core tier one capital ratio to over 10 per cent from 9.24 per cent core capital ratio now. Its tier one capital ratio will climb to over 13 per cent, executives said.
Source: Punch
