BOC mulls plan to float shares in Hong Kong

20:15, January 26, 2010      

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Bank of China (BOC) is considering raising extra capital by selling new shares in Hong Kong after its 40 billion yuan convertible bond sale on the mainland, Tuesday's China Daily reported.

The bank is likely to sell only its H-shares traded in Hong Kong, but is yet to decide on the timing and size of issue, the newspaper quoted BOC President Li Lihui as saying.

The remark came after the country's largest foreign exchange lender announced Friday that it would float a 40 billion yuan convertible bond issue in the A-share market to shore up capital and maintain lending capacity.

BOC has no other fund-raising plans in the mainland market apart from the convertible bond issue, said Li, allaying fears that hefty share sales would upset the mainland stock market.

The bank said in a statement that it would seek approval from shareholders to sell equity equivalent to 20 percent of its outstanding shares. That also indicates roughly the size of the new offering, analysts say.

"We expect the bank to net around 60 billion yuan (8.8 billion U.S. dollars) from the H-share sale. The funds raised from the Shanghai and Hong Kong markets may lift the lender's capital adequacy ratio by nearly 2 percent in the next two years and help raise its lending by 15 percent annually," said Qiu Zhicheng, banking analyst of Guosen Securities.

A record-setting credit expansion last year saw BOC's capital adequacy ratio falling to 11.63 percent by the third quarter of 2009, against the statutory requirement of 11 percent for major banks.

BOC, the country's third largest lender, was one of the banks that needed capital infusions after last year's 9.6 trillion yuan lending spree, said the newspaper.

The newspaper quoted Liu Mingkang, chairman of China Banking Regulatory Commission, as saying that new lending would be capped at 7.5 trillion yuan this year, a clear indication that loan growth would be curbed.

Source: Xinhua
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