China Merchants Bank plans $3b rights offer

China Merchants Bank plans to raise about $3 billion through a rights offering by the end of the year, aiming to boost its capital after overpaying for a recent acquisition, investment banking sources said.

The issuance would be one of the largest in Hong Kong this year and comes as corporate capital raising in China’s stock markets picks up steam following gains in equities in the second quarter.

Several investment banks had already begun formally pitching China Merchants for mandates to handle the offering, sources said yesterday, speaking on condition of anonymity.

The offering would be split between holders of China Merchants’ Shanghai-listed A shares and its Hong Kong-listed H shares, the sources said.

The bank was pursuing a rights offering over other kinds of offers due to its dual-listing, the sources noted.

An investor relations officer at China Merchants, China’s sixth-largest lender, said only that the bank was studying the issue, but had no concrete plans.

China Merchants’ Hong Kong-listed shares fell as much as 4.5 percent yesterday and ended down 3.7 percent, in line with a decline in bank shares and versus a 0.8 percent for the broader market.

Despite the negative stock reaction, Kim Eng Securities analyst Ivan Li called the development generally positive

“A rights offering can strengthen the bank’s capital base,” he said.
“The new funds would boost the bank’s capital adequacy ratio to 9 percent, similar to its peers, from a current level of around 6.6 at the end of last year,” Li said.
 

Explore the World, Understand China!
Please log on www.gloaltimes.cn