HSBC Holdings Plc (HSBA) agreed to buy about $1.7 billion of new Bank of Communications Co. shares to maintain its 19 percent stake in China’s fifth-largest lender.
BoCom said today it plans to raise 56.6 billion yuan ($8.9 billion) in the world’s biggest share sale since May. Europe’s biggest bank will buy about 2.36 billion shares at HK$5.63 apiece, the London-based HSBC said today in a statement.
“Maintaining our stake in BoCom reinforces our position as the leading foreign bank in mainland China and is consistent with our strategy to deploy capital in faster growing markets,” HSBC Chief Executive Officer Stuart Gulliver said in the statement.
HSBC wants to expand its branch network in China or boost its stake in BoCom, should rules be relaxed. The lender paid $1.75 billion for its stake in August 2004, and operates about 110 outlets in the country under its own brand. Foreign banks are limited to owning less than 20 percent of Chinese banks and must get regulatory approval to open new branches.
HSBC’s share of profit from BoCom rose to $1.37 billion in 2011, from $987 million a year earlier, driven by loan growth and interest rate rises, the company said in its annual report. The bank will pay for the new Hong Kong-traded shares in cash, it said.
At $8.9 billion, BoCom’s share sale would be the largest since Glencore International Plc raised $9.9 billion in an initial public offering in May, according to data compiled by Bloomberg. It comes as China’s banking regulator is planning tougher capital requirements for the biggest lenders to fend off rising credit risks.
Gulliver “hopes to be allowed as reforms progress either to increase HSBC’s stake in BoCom beyond 20 percent, or build the HSBC branch network over the medium term toward 800,” Gareth Hewett, a Hong Kong-based spokesman for the lender, said in February.
-- With assistance from Stephanie Tong in Hong Kong. Editors: Jon Menon, Keith Campbell
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