China's Industrial Bank aims to raise 18 billion yuan

China's Industrial Bank Co.,Ltd announced Monday that it plans to raise a maximum of 18 billion yuan through shares placement to replenish its capital and boost its capital adequacy ratio.

According to the plan, every 10 existing shares can be swapped for up to 2.5 new shares.

As for the share price, the bank said it will be determined based on the lender's latest audited net asset value per share, its share price on the secondary market and its price-to-earnings ratio, but added the price will be no less than the lender's latest audited net asset value per share.

The bank also announced the plan will be voted on by the board of directors on December 8, and stills need the approval of the China Banking Regulatory Commission (CBRC) and China Securities Regulatory Commission (CSRC).

In fact, because of a lack of capital base, Industrial Bank's board of directors has asked the lender to issue an 18 billion yuan subordinate debt in December last year, but only 10 billion yuan was approved by the regulatory departments this August.

A banking analyst said because of the shortage of capital due to the "discount amount", in addition to the large amount that the bank loaned out this year, it is urgent for the bank to replenish its capital.

"We issued 10 billion yuan in subordinate debts on September 11, so the space for the bank to offer long-term subordinated debts to replenish the supplementary capital is limited. If there is no follow-up investment to supplement the capital base, the capital adequacy ratio of the bank for next year will further decline. That's why the demand to supplement the core capital is urgent," the bank said in a statement.

By the end of September, Industrial Bank's capital adequacy ratio was 10.63 percent, down 0.61 percent year-on-year and the core capital adequacy ratio was 7.5 percent, dropping 1.44 percent compared with the same period last year.
 

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