UPDATE: China Citic Bank Eyes Rights Issue In 1st Quarter

China Citic Bank Corp. (0998.HK), in which Spain's Banco Bilbao Vizcaya Argentaria SA (BBVA) has a 15% stake, said Thursday it hopes to carry out its planned CNY26 billion (US$3.8 billion) rights issue to boost its capital in the first quarter of 2011.

The medium-sized bank is the latest Chinese lender to seek new funds to shore up its balance sheet after a government-led credit boom last year raised concerns about the health of Chinese banks' capital.

Citic Bank said Wednesday it intends to sell up to 2.2 shares for every 10 of its existing shares in Shanghai and Hong Kong, and that it will use the proceeds to support its core capital needs over the next three years.

As of June 30, the bank's capital adequacy ratio, which measures the money banks must hold against their assets, was 10.95%, slightly above the 10% regulatory minimum for medium-sized Chinese banks.

"It will still be a challenge for the bank to keep its CAR above the minimum level required by the banking regulator each month in the second half," said Citic Bank President Chen Xiaoxian.

BBVA has said it would support its Chinese partner's fund-raising plan, said Citic Bank Vice President Cao Tong, without elaborating.

Citic Bank, the domestic banking arm of China's Citic Group, said Wednesday its first-half net profit rose 45% from a year earlier to CNY10.69 billion because of a continued expansion in lending and an improved net interest margin. Citic Group is a financial conglomerate that was set up in 1979 by China's late Vice President Rong Yiren and operates at the direction of the State Council.

Several Chinese banks plan to raise funds following last year's government-directed lending, including three of the country's biggest, Industrial & Commercial Bank of China Ltd., Bank of China Ltd. and China Construction Bank Corp., which are planning to raise as much as CNY180 billion via rights offerings in Shanghai and Hong Kong.

-Victoria Ruan contributed to this article, Dow Jones Newswires; 8610 8400 7799; victoria.ruan@dowjones.com

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