Bank refinancing in peak

17:16, May 25, 2010      

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Shanghai Stock Exchange announced yesterday that Bank of China's plan to issue 40 billion yuan of convertible debts has been approved by the China Securities Regulatory Commission. That will be the largest convertible debts issuance and also the biggest refinancing plan ever in Chinese capital market.

Today, China CITIC Bank announced that the commission approved its issuance within 16.5 billion yuan of the subordinated bonds in the bond market nationwide.

Recapitalization of banks means reserving resources for the future. As to the large-scale commercial banks, refinancing had been a hot topic, but is now a significant task in capital operation.

On May 19, the general meeting of the Industrial Commercial Bank of China's shareholders approved the issuance of less than 25 billion yuan of A-share convertible debts and share issuance of no more than 20 percent of its H-share capital.

Banking analysts pointed out that the refinancing tide in the banking sector may face barriers of both government regulation and market situation. The commercial banks should not only explore inside potential, but also further strengthen capital management.

However, insiders believe that commercial banks' refinancing plans won't have any severe impact on the stock market.

By the end of 2009, the average capital adequacy ratio of 14 listed banks dropped from 13.4 percent at the end of 2008 to 11.3 percent. However, in the first quarter of 2010, capital adequacy ratio of the Industrial Commercial Bank of China, Bank of China, China Construction Bank, Bank of Communications accounted for 12 percent, 11.1 percent, 11.4 percent and 11.7 percent respectively, declining 0.13, 1.25, 0.93, and 1.04 percentage points, a little higher than the supervision red line.

By People's Daily Online


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