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Pudong Bank to issue bonds, sell shares

By Yang Zhen (China Daily)
Updated: 2009-04-11 08:16

Shanghai Pudong Development Bank, a mid-sized Chinese bank, is planning to raise up to 30 billion yuan by selling shares and bonds to improve its capital adequacy, the bank said in a statement on Friday.

The bank said it planned to sell up to 15 billion yuan in domestic A-shares from a private placement, equivalent to as much as 20 percent of existing shares, to 10 investors including the bank's major shareholders. It would also issue up to 15 billion yuan in subordinated debt.

Related readings:  Pudong Bank plans $4.4b fund raising  Pudong Bank FY net profit up 128%  10% growth forecast for Pudong

The funds will be used to boost its core capital and improve its capital adequacy ratio, which was 9.06 percent at the end of 2008.

China's banking regulator has asked mid-sized listed banks to raise their capital adequacy ratio to above 10 percent as the global economic downturn has increased potential risks in Chinese banks.

"Pudong bank's capital adequacy ratio has always been lower than other banks of similar size. For a mid-sized bank like this, it is important to have enough capital for its business expansion in the future," said Feng Wei, analyst, Guohai Securities.

The bank's new loans growth was considerably strong in the first quarter of this year compared to other mid-sized banks, leading to its increased demand for more capital, Feng said.

Chinese banks went on a lending spree since the beginning of this year, answering the government's call to boost domestic economic growth amid the global financial crisis. Lending by Chinese banks reportedly hit a record high of 1.87 trillion yuan in March, following strong new loans growth estimated at 2.69 trillion yuan in the first two months.

Pudong bank's 2008 net profit surged 127.6 percent from a year earlier to 12.5 billion yuan, according to its earnings report released on Friday. Its non-performing loan (NPL) ratio dipped 0.25 percentage points to 1.21 percent at the end of last year.

But this year, analysts forecast a negative profit growth for the bank, as the narrowing net interest margins would hurt the bank's profitability further amid a slowing economy.

The bank's net interest margin in the fourth quarter dropped 52 basis points compared to the quarter before, while its full-year net interest margin dipped 7 basis points from a year earlier.

China Jianyin Investment securities analyst Chen Shuixiang predicted the bank's net profit to fall 1.92 percent this year.