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November 24, 2009

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Rights offer to raise US$2.6b

THE Industrial Bank plans to raise up to 18 billion yuan (US$2.63 billion) through a rights offer within 18 months to boost its capital, the lender said yesterday.

The Fujian Province-based bank will offer 2.5 shares for every 10 shares held, the mid-sized lender said in a statement to the Shanghai Stock Exchange yesterday. The bank will use the money to shore up its capital so that there will be sufficient funds available to ensure a steady growth in loans. The rights offer is pending approval from banking and securities regulators.

"The rights offer is in line with the bank's three-year target for stable growth," said She Minhua, a Haitong Securities analyst, yesterday. "It's down to earth and achievable."

Haitong maintained a "buy" rating on the bank.

In the first 10 months of this year, banks in China have issued 8.92 trillion yuan of loans, a rise of 5.26 trillion yuan from a year ago. The loan amounts have already surpassed the 5 trillion yuan target for 2009 set at the start of this year.

The Industrial Bank plans to expand loans by 15 percent to 24 percent annually from this year to 2012. It plans to boost its capital adequacy ratio to 12 percent from 9.21 percent at the end of June, the bank said. The China Banking Regulatory Commission requires listed banks to have a CAR of 10 percent while banks only need to have a minimum of 8 percent.

The bank also plans to lift its core capital ratio from 7.41 percent at the end of June to 8 percent, double the regulatory minimum of 4 percent.

The Industrial Bank yesterday gained 0.82 percent to 40.50 yuan while the Shanghai Composite Index rose 0.92 percent to 3,338.66.


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