Tags: China | fallout | bank | failure

Bank of China Plans to Raise Up to $16 Billion in Capital

Tuesday, 13 May 2014 09:35 AM

Bank of China Ltd., the nation’s fourth-largest lender by market value, is seeking as much as 100 billion yuan ($16.05 billion) selling preferred stock in China and offshore, it said in a Shanghai stock exchange statement today.

Its board approved a plan to sell as many as 600 million preferred shares through private transactions on the mainland, becoming the latest Chinese company to issue the securities domestically since the government began allowing them to two months ago. The bank also plans to sell no more than 400 million preferred shares offshore, the Beijing-based lender said in the statement.

The sale follows Agricultural Bank of China Ltd., the country’s third-biggest, which last week said it would raise 80 billion yuan by selling as many as 800 million preferred shares through private transactions on the mainland. Stricter requirements introduced by the government in 2013 mean China’s four biggest banks will face a capital shortfall of $87 billion under the new rules by 2019, Mizuho Securities Asia Ltd. estimated in a March report.

Preferred shares, available under a trial program approved by regulators two months ago, permit banks to raise capital without selling common equity. The securities that are issued by banks through private placements can be converted into common stock if capital ratios fall below a certain level.

Other Issuers

Last month, Shanghai Pudong Development Bank Co. said it will raise as much as 30 billion yuan, while Xinjiang-based Guanghui Energy Co. said it plans to sell 5 billion yuan of the securities.

Bank of China shares were unchanged at HK$3.43 at the close of trading in Hong Kong today before the announcement.

Combined profit at the four biggest Chinese banks rose 12 percent last year, down from a 15 percent increase in 2012. Declining earnings growth and rising defaults at the largest lenders have curbed their ability to retain earnings to fulfill capital requirements.

China’s systemically important banks may see their capital adequacy ratio fall to 10.5 percent in the event bad loans surge fivefold, according to a stress test by the nation’s central bank last month.

China’s government is drafting rules to help manage the fallout of any bank failure, two people with knowledge of the matter said today, as lenders in the country face rising loan defaults and increased competition.

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Bank of China Ltd., the nation's fourth-largest lender by market value, is seeking as much as 100 billion yuan ($16.05 billion) selling preferred stock in China and offshore, it said in a Shanghai stock exchange statement today.
China, fallout, bank, failure
381
2014-35-13
Tuesday, 13 May 2014 09:35 AM
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