Bank of China's $5.9b bond sale gets approval

Updated: 2010-05-25 09:46
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Bank of China Ltd, the nation's third-largest lender by market value, received approval from the securities regulator to sell as much as 40 billion yuan ($5.9 billion) of bonds convertible into stock.

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The China Securities Regulatory Commission gave the clearance, according to a statement on its website, paving the way for Bank of China to become the first of the nation's four biggest publicly traded lenders to raise additional capital this year.

Chinese banks are under pressure to raise money to meet tougher financial guidelines after an unprecedented 9.59 trillion yuan of new loans last year weakened their capital. Bank of China advanced 1.6 trillion yuan of new loans in 2009, more than any lender in the country.

The Beijing-based bank's capital adequacy ratio fell to 11.09 percent as of March 31, below the minimum 11.5 percent required by the China Banking Regulatory Commission. Shareholders approved the bond sale in March, and also granted the lender a mandate to sell as much as 20 percent of its outstanding stock in Hong Kong or Shanghai, or in both markets.

Industrial & Commercial Bank of China Ltd, China Construction Bank Corp and Bank of Communications Co have announced plans to raise a combined 142 billion yuan in bond and stock sales.

BoCom fundraising

The CSRC said in a separate statement that it will review BoCom's rights offer on May 28. The bank, part-owned by HSBC Holdings Plc, plans to raise as much as 42 billion yuan.

Shares of Bank of China gained 1.3 percent in Hong Kong Monday, narrowing this year's decline to 5 percent. The stock rose 1.3 percent to close at 4.01 yuan in Shanghai. Bank of Communications rose 1.9 percent to HK$8.05 in Hong Kong trading Monday. The Shanghai-listed shares rose 3 percent to 6.96 yuan.