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CITIC banking on bond boost
( 2003-12-08 23:15) (China Daily)

Officials from CITIC Industrial Bank said Monday the institution would use part of proceeds from a bond issue scheduled later this week to replenish its capital base, in its latest bid to prepare for an initial public offering.

"Six billion yuan (US$720 million) of the proceeds will be used to increase our capital,'' CITIC President Dou Jianzhong told reporters.

The CITIC Group, one of China's largest financial conglomerates and the Industrial Bank's parent firm, said Monday it plans to issue 10 billion yuan (US$1.2 billion) of bonds on Friday. It includes a 6 billion yuan 20-year tranche, and a 4 billion yuan (US$480 million) 10-year tranche.

Its prospectus said part of the proceeds will be used for recapitalizing the wholly-owned banking subsidiary, and the rest will be used to pay off its foreign debts.

The capital injection will bring the bank's capital adequacy ratio up to regulatory standards, said CITIC Executive Vice-President Liu Zhiqiang. The bank's capital adequacy ratio currently stands at 5.85 per cent, far below a regulatory minimum requirement of 8 per cent.

Still, Liu said the bank would have to come up with more ways to keep its capital adequacy ratio above the line as its rapidly expanding assets continue to dilute the ratio.

According to statistics, the bank's assets totalled 350 billion yuan (US$42 billion) at the end of June.

Rating company Moody's Investors earlier this year downgraded the outlook for CITIC Group to negative from stable, citing the low capital adequacy ratio of the bank, which is a major subsidiary. Bank officials said earlier that the group had injected more than 1 billion yuan (US$120 million) of bank profits last year back into its capital base.

The bank's listing plan was stymied earlier this year as the Hong Kong Monetary Authority killed a restructuring plan which involved one of the group's Hong Kong-based subsidiary bank.

Bank officials said the listing plan is facing a new situation now after the signing of the Closer Economic Partnership Arrangement between the special administrative region and the mainland in the middle of the year.

"We are considering what we can do next,'' said Liu. "As for the timing of the listing, we'll be moving as fast as we can.''

The bank will have to go through a joint-stock restructuring to meet listing requirements.

Liu said the group has made substantial progress in the direction of becoming a comprehensive financial conglomerate. CITIC Holdings, established by the CITIC Group in late 1991 under a special regulatory approval to manage its financial operations from banking to securities, has "done a lot of work'' in improving its risk control mechanisms, he said.

China still separates the banking, securities and insurance sectors from each other mainly due to risk concerns.

And the group plans to launch a new product later this month in Shanghai that encompasses banking, insurance, and trusts as well as investment fund functions, Liu said.

In a bid to beef up its presence in the retail banking sector, the bank issued its first credit card in Beijing Monday.

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