-- BoCom plans to raise CNY56.6 billion in private placement to
boost capital
-- BoCom to issue 6.54 billion yuan-denominated A shares at
CNY4.55 each
-- BoCom to issue 5.84 billion Hong Kong dollar-denominated H
shares at HK$5.63 apiece
-- HSBC will pay HK$13.26 billion to maintain 19% stake in
BoCom
(Adds BoCom's quote in 3rd, 4th paragraph, adds details of the
offering in 8th, 9th paragraph, adds an analyst's quote in 10th,
11th paragraph, and background throughout)
SHANGHAI (Dow Jones)--Bank of Communications Co. (3328.HK),
China's fifth-largest bank by assets, said Thursday it would raise
CNY56.6 billion ($9 billion) in a private placement to boost its
capital in order to comply with stricter regulations in China.
The bank, also known as BoCom, is the first major Chinese lender
to raise money to shore up its capital after China proposed
stricter capital rules for banks last year. The regulations will
likely dilute banks' capital adequacy ratios, prompting them to
raise funds in equity markets and cut their dividend payouts in the
coming years.
"The share placement is aimed at satisfying the capital needs of
the company to achieve sustainable and stable business
development...and the increasingly stringent regulatory
requirements," BoCom said in a statement.
The bank, 19%-owned by HSBC Holdings PLC, said proceeds from the
sale will go toward replenishing its capital.
To comply with the international regulatory accord known as
Basel III and to curb credit risks, China's banking authority in
August released a series of draft rules that included increases in
risk weightings for mortgage loans to second-home buyers and
holdings of debt issued by other banks.
The draft required Chinese big banks to have a minimum core
capital adequacy ratio of 9.5% and a minimum capital adequacy ratio
of 11.5% by 2013. As of Sept. 30, BoCom's core capital--comprising
its equity and retained capital-- represented 9.24% of its risky
assets.
The bank said it would issue 6.54 billion yuan-denominated A
shares at CNY4.55 each and 5.84 billion Hong Kong
dollar-denominated H shares at HK$5.63 each (US$0.73).
According to the statement, 12 institutional investors,
including China's Ministry of Finance and National Social Security
Fund, HSBC, auto maker FAW Group and tobacco manufacturer Hongta
Group, will take part in the placement.
HSBC will pay HK$13.26 billion to maintain its holding, while
China's finance ministry, which has a controlling stake of about
27%, will spend CNY15 billion to keep its ownership from being
diluted, the statement said.
DBS analyst Alexander Lee said that investors will appreciate
such an offering, as it will lift the uncertainty surrounding
capital raising and potential dilution.
"After replenishing its capital, we expect BoCom to resume
normal dividend payout levels," he said.
To help boost its capital base, BoCom didn't pay a dividend for
the January-June period, the first time it had omitted a dividend
in four years.
Earlier this month, midsized Chinese lender Industrial Bank Co.
said it planned to raise CNY26.4 billion through a private
placement to replenish its capital.
CITIC Securities Corporate Finance (HK) Ltd will be the placing
agent for BoCom's placement.
-Rose Yu and Fiona Law contributed to this article, Dow Jones
Newswires; 8621 6120-1200; rose.yu@dowjones.com