Shanghai Pudong Development Bank Co., part owned by Citigroup Inc, confirmed in an overnight meeting on Wednesday that it plans to sell no more than 800 million additional shares, lower than the earlier rumored one billion.
Pudong Dev. Bank is expected to refinance around 32 billion yuan (4.6 billion U.S. dollars) within one year if based on its closing price of 40.62 yuan at the Shanghai Stock Exchange on Wednesday, lower than the earlier rumored figure of 40 billion yuan.
"We have decided to issue an additional 800 million shares from the very beginning, and directors of the bank have never considered other plans -- these market rumors were groundless," said Shen Si, directors board secretary.
Shares in the mid-sized bank dived by the 10-percent daily limit on Monday (Feb. 20), and it lost 20 percent of its market value in the past week on market talk that it planned to raise 40 billion yuan by public offering.
Share price continue to tumble in the following week -- from 50yuan to 39 yuan -- in despite of the bank's effort to deny market rumors.
Previous talk that 26 listing companies including Ping An Insurance, China Telecom and Pudong Dev. Bank planned to refinance billions of capital over stock markets had sparked market concern over liquidity and triggered panic selling.
The benchmark Shanghai Composite Index tumbled 4.07 percent on Feb. 25, and the panic selling led shares in China Unicom, the country's second-largest mobile operator, to plunge 9.98 percent to 10.92 yuan.
To ease the panic mood in the market, China Securities Regulatory Commission (CSRC) issued a statement on Monday evening in which it urged listed firms to "carefully" consider investor demand when seeking to refinance through share offerings.
"Listed firms should, in light of the market conditions and their capital needs, carefully consider the size and timing of refinancing and investor opinion before making decisions on refinancing," a CSRC spokesman said in a statement.
As for Pudong Dev. Bank, a share sale worth 20 billion yuan was reasonable, and a huge capital input would dilute the earnings per share. Capital adequacy ratio of the Bank is to reach 11 percent in 2008 after capital injection, analysts said.
The bank's capital adequacy ratio fell to 9.15 percent at the end of last year from 9.27 percent one year ago, which forced the bank to seek more capital from the market.
Along with its bulletin, the bank also said in its financial statement that the net profits reached 5.45 billion yuan, an increase of 63.85 percent year on year or 1.263 yuan per share.
Its total assets stood at 914.98 billion yuan by the end of last year, 32.73 percent higher than a year ago.
New York- based Citigroup has a 3.78 percent holding in Pudong Dev. Bank, which was diluted from the original five percent it bought in 2003 after the Shanghai company sold new shares in November 2006.