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October 1, 2009

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Pudong bank raises US$2.2b

SHANGHAI Pudong Development Bank has raised 15 billion yuan (US$2.2 billion) in a private placement to replenish its reserves and raise its capital-adequacy ratio following a period of rapid growth in lending.

The Shanghai-listed bank sold 904 million new shares at 16.59 yuan each to nine institutional investors, the bank said yesterday in a filing to the Shanghai Stock Exchange.

"We expect the bank to kick off more capital raisings," said Wendy Tang, a Northeast Securities analyst. "It's still uncertain, however, how these plans will be implemented."

She maintains a cautious "buy" rating on the bank's shares.

Pudong Development said last month that it will tap several channels to shore up its capital. Analysts said those avenues may include a fundraising in Hong Kong and the sale of convertible bonds.

The bank has said it aims to raise its capital base to 115 billion yuan by 2010 from 78.8 billion yuan at the end of June. Its target for 2011 is set at 134 billion yuan.

The lender has said it wants to lift its capital ratio to 10 percent by 2010.

The bank's capital-adequacy ratio, the main measure of bank's financial strength, will rise to 9.63 percent after the private placement.

Last year, China's banking regulator raised the minimum capital ratio for public banks to 10 percent from 8 percent and will raise that requirement to 12 percent by the end of this year.

Pudong Development's capital-adequacy ratio fell to 8.11 percent in late June after lending rose 35 percent in the first half. The bank held the lowest capital ratio among listed banks.

Citibank's stake in the Shanghai bank will fall to 3.4 percent from 3.8 percent after the sale, Pudong Development said.

Pudong Development slid 0.1 percent to 19.65 yuan yesterday in Shanghai trading, compared with a 0.9 percent gain in the benchmark Shanghai Composite Index.


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