BoCom: Rights Issue To Raise Core Capital Adequacy Ratio By Over 1.6 Pct Points

Bank of Communications Co.'s (3328.HK) rights issue will boost the bank's core capital adequacy ratio by 1.6 percentage points, Chief Executive Yu Yali said Monday.

The lender, China's fifth largest by assets, plans to raise CNY33.1 billion in the rights issue in Shanghai and Hong Kong, it said Sunday, 21% lower than its upper target of CNY42 billion amid weak stock market conditions and Agricultural Bank of China Ltd.'s huge initial public offering.

BoCom's core capital-adequacy ratio--equity and retained earnings as a proportion of assets--is the lowest among China's publicly traded major banks. At the end of last year, the ratio was 8.15%, close to the minimum requirement of 7%.

BoCom, 19% owned by HSBC Holdings PLC (HBC), also expects to use its retained profit to boost its capital, and the fund-raising will support its core capital above regulatory requirements for at least three years, Yu said at a news briefing.

Qian Wenhui, a BoCom vice president, said the original CNY42 billion fund-raising target was a top-line estimate.

"It doesn't mean we will always raise funds at the top end," Qian said. "When we plan fund-raising, we must consider market conditions, the bank's need for business expansion and shareholders' interest."

-Rose Yu contributed to the article, Dow Jones Newswires; (86-21) 6120-1200; rose.yu@dowjones.com

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