CMB's 22 b yuan financing plan gets shareholder approval

China Merchants Bank (CMB)'s 22 billion yuan financing plan has been approved by the general meeting of stockholders Monday with 99.75 percent of shareholders supportive of the plan.

The bank said that it planned to raise 15 billion yuan to 18 billion yuan through shares placement on August 13, but it changed its mind and decided to increase the amount to 18 billion to 22 billion yuan on August 28.

This financing plan will be also in the way of shares placement. Both A-share holders and H-share holders can participate in this placement, and the placement ratios of A-shares and H-shares are same, where every 10 shares can be swapped with up to 2.5 shares.

Based on the benchmark of the total shares at 19.12 billion on August 27, the total shares for placement will not exceed 4.78 billion shares, among which the A-shares will not exceed 3.91 billion, and H-shares will not exceed 865 million.

But the unit price of the shares for placement has not been decided. However the bank said that the price will be set according to CMB's stock price in the secondary market, price/earning ratio, price/book value ratio, and the bank's demand of core capital in the next three years. The bank also needs to consult with the principal underwriter to determine the final price. Ma Weihua, president of the bank said the price will also refer to recent placement cases of other companies for reference and the unit price will not be less than net asset value per share of the bank.

This placement will be effective for 12 months from October 19.

Qin Xiao, chairman of the bank explained why the bank is proposing this financing plan. He explained that it was mainly due to the acquisition of Wing Lung Bank last year, low capital adequacy ratio from massive loans in the first half of the year and the net profit due to the narrow margins because of the global financial crisis.

According to the bank's semi-annual report, the capital adequacy ratio is 10.63 percent, down 0.71 percent compared with the end of last year. The core capital adequacy ratio is 6.5 percent, dropping 0.06 percent compared to the end of last year.

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