China’s BoCom Plans World’s Largest Share Sale Since Last May
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China’s fifth largest bank, the Bank of Communications Co (BoCom), plans to sell up to 56.6 billion yuan ($8.9 billion) of its shares to 12 institutional investors – including the Chinese Ministry of Finance and HSBC Holdings – in what will be the world’s biggest private share sale since May 2011.
The publicly listed bank said that the move was intended to replenish its capital base, with the bank unlikely to seek further capital investment input for the next three to four years at least.
China’s fifth largest bank, the Bank of Communications Co (BoCom), plans to sell up to 56.6 billion yuan ($8.9 billion) of its shares to 12 institutional investors – including the Chinese Ministry of Finance and HSBC Holdings – in what will be the world’s biggest private share sale since May 2011.
The publicly listed bank said that the move was intended to replenish its capital base, with the bank unlikely to seek further capital investment input for the next three to four years at least.
[quote]“BoCom will become the most-capitalized bank among big lenders in China,” said Sheng Nan, a Hong Kong-based analyst at CCB International Securities Ltd, to Bloomberg BusinessWeek. “Participation of the government shareholder and HSBC ensures this is a long-term investment and there will be no additional stock supply to depress the market,” he added.[/quote]Related: S&P Rates Chinese Banks Higher Than U.S. Big Banks
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Chinese banks are set to see a flurry of capital fund-raising activities this year, as stricter regulatory requirements kick in that call for greater capital adequacy.
Last August, the China Banking Regulatory Commission issued a draft that required all of the country’s largest banks to have a minimum core capital adequacy ratio of 9.5 percent and a minimum capital adequacy ratio of 11.5 percent.
Back then, BoCom’s core capital adequacy ratio was 9.24 percent, falling short of the requirement set by China’s banking regulator.
The latest round of fundraising though will lift BoCom’s core capital adequacy ratio to over 10 percent, while its capital adequacy ratio will jump to over 13 percent, said executives from the company.
Under its private share placement plan, BoCom will sell off 6.54 billion new shares at 4.55 yuan apiece in the Shanghai stock exchange, while a further 5.56 billion shares will be traded in Hong Kong for HK$5.63 each.
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HSBC, for instance, will pay about HK$13.2 billion for 2.36 billion Hong Kong-listed shares, keeping its stake at no less than the current 19.03 percent. The bank said that it would pay for the shares with cash from internal resources.
“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,” said HSBC Chief Executive Stuart Gulliver in a statement, quoted by Reuters.
The last time that BoCom raised funds for capital replenishment was in 2009, when the government went on a lending spree to boost economic growth in the wake of the global financial crisis.
[quote]A BoCom press statement said that increasing capital this time would “strengthen the bank’s ability of resisting risks and profitability and ensuring sustained, rapid and sound development of the business”.[/quote]
