Minsheng Bank to raise 30b yuan in fresh fund

Updated: 2011-02-26 07:35

(HK Edition)

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China Minsheng Banking Corp Ltd is planning to sell more shares in Hong Kong and yuan-denominated convertible bonds, revising its previous plan for a private share placement in Shanghai, two sources with direct knowledge of the matter said Friday.

The seventh-largest Chinese lender is looking to raise a total of 30 billion yuan ($4.56 billion) - 21 billion yuan in convertible bonds and 9 billion yuan via Hong Kong share sale - Bloomberg News reported, citing a source.

That would be larger than its previous refinancing plan announced last month. It had said it planned to sell 21.5 billion yuan in a Shanghai share placement to replenish capital, targeting major shareholders such as China Life Insurance.

Chinese banks are facing a tough time as the central government has been aggressively tightening liquidity, with the latest being a rise in the reserve requirement ratio Feb 18, to cool the country's red-hot economy and bring down stubbornly high inflation.

Those measures and the possible slowdown in China's economy could prod banks, especially smaller ones, to consider raising more money from the capital market.

The bank has halted trading of its shares pending an announcement. Minsheng said in a statement to the Shanghai Stock Exchange on Thursday evening that a board meeting would be held on Friday to discuss amendments to its refinancing program.

But it is revising its previous fundraising plan after opposition from smaller shareholders, who argue that a private placement of shares would favor major shareholders and hurt small shareholders' interest, the sources said.

"It's a wiser plan. Hong Kong-listed banks are traded at a premium to the Shanghai-listed ones," said Chen Zhihua, analyst at Changjiang Securities in Shanghai.

Hong Kong's stock market has sharply outperformed the Shanghai bourse since the start of last year, with the mainland exchange being hit by a slew of government steps to clamp down on high asset prices.

On Monday, rival China Everbright Bank said it was planning to sell up to 10.5 billion H-shares, or around $6 billion based on its Shanghai IPO pricing just six months ago.

Last year, China's biggest lenders such as Bank of China and China Construction Bank rushed to raise funds to strengthen their balance sheets after a lending binge in 2009.

Mid-sized lenders such as China Merchants Bank and Shenzhen Development Bank, as well as dozens of city commercial banks may also look to raise more funds, analysts have said.

Minsheng's core tier 1 capital ratio, a key measure of financial strength, was 8.1 percent in 2010, compared with an average of 9.9 percent for other listed mainland banks, according to Goldman Sachs estimates.

Tougher capital rules may be required for China's biggest lenders that are strategically important, the head of the banking regulator was quoted by the official China Securities Journal as saying late last year.

Reuters - Bloomberg

(HK Edition 02/26/2011 page2)