China Minsheng Banking Corp. (1988), the nation’s first non-state lender, is seeking as much as HK$11.3 billion ($1.46 billion) in a Hong Kong share sale to shore up capital amid tightened rules for risk buffers.
The Beijing-based bank is offering 1.65 billion shares at HK$6.65 to HK$6.86 apiece, according to terms for the deal obtained by Bloomberg News. That represents a discount of as much as 7 percent to the March 23 closing price of HK$7.15.
Minsheng joins local rivals Bank of Communications Co. and Industrial Bank Co. (1398) in seeking funds after a two-year, $2.7 trillion lending spree sapped their finances. China’s banking regulator is planning tougher capital requirements for lenders to fend off rising credit risks.
“The fundraising will ease Minsheng’s capital shortage only for a short while,” said Sun Peng, a Beijing-based analyst at BOC International Ltd. “With the new capital requirement to take effect in July, another round of equity sales by Chinese banks is just around the corner.”
The China Banking Regulatory Commission said in August that it would require the country’s largest, or so-called systemically important, lenders to have a minimum capital adequacy ratio of 11.5 percent by the end of next year. Smaller banks would be required to have at least 10.5 percent under “normal conditions” by the end of 2016, the CBRC had said.
Minsheng’s capital adequacy ratio stood at 10.86 percent as of Dec. 31, while the core ratio was 7.87 percent. Both are the lowest among the nine publicly-traded Chinese lenders listed in Hong Kong.
In February 2011, Minsheng said it planned to issue as much as 20 billion yuan ($3.17 billion) of convertible bonds in Shanghai and sell as many as 1.65 billion new H-shares in Hong Kong to replenish the core capital of company.
“The price range is reasonable,” said Stanley Li, a Hong Kong-based analyst at Mirae Asset Securities (HK) Ltd. “Minsheng Bank has a differentiated business. Given it’s a non- state-owned lender, its corporate governance is also better than peers. We are positive on Minsheng.”
Minsheng currently trades at 5.3 times its forecast profit in 2012, the cheapest among Hong Kong-listed peers.
The lender, which has about 590 outlets nationwide, was founded in 1996 by pig-feed tycoon Liu Yonghao and some of China’s wealthiest businessmen. The bank has boosted profit by an average 50 percent since 2007 by focusing on smaller enterprises. Profit surged 59 percent to 27.9 billion yuan last year on higher income from lending and fee-based services.
Rival Share Sales
China’s publicly-traded lenders have raised about $87 billion from equity markets since 2010 as an explosion in credit to local governments and property developers to support the government’s 4 trillion-yuan stimulus package sapped their financial strength.
Shanghai-based Bank of Communications said on March 15 it plans to raise 56.6 billion yuan in the world’s biggest share sale since May. Industrial Bank, a Chinese lender part-owned by Hang Seng Bank Co., said earlier this month it will raise as much as 26.4 billion yuan in a private placement.
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