Money

Hua Xia to raise 20.8b yuan via share placement

(Agencies)
Updated: 2010-05-06 10:23

China's Hua Xia Bank said on Thursday it planned to raise up to 20.8 billion yuan ($3.05 billion) via a private share placement in which State-owned steel mill Shougang would leapfrog Deutsche Bank as the biggest shareholder.

Hua Xia is the latest Chinese lender to announce fundraising plans, after bigger rivals including Bank of China and China Construction Bank unveiled schemes to raise tens of billions of dollars to replenish capital after last year's lending binge.

Hua Xia plans to sell a total of 1.68 billion shares at 11.17 yuan apiece to select institutional investors including steel mill Shougang Corp, State Grid and Deutsche Bank, the Beijing-based lender said in an exchange statement.

"In order to fund steady development of the bank and business expansion, and to meet higher regulatory standards as soon as possible, it's necessary for us to further raise capital adequacy ratios," Hua Xia said in the statement.

After the share placement, which still awaits shareholder and regulatory approval, state-owned Shougang would become Hua Xia's biggest shareholder with a 20.28 percent stake, replacing Deutsche Bank, which would own 19.99 percent of the Chinese lender, the maximum allowed by the government.

Chinese banks are being urged by regulators to raise more cash after a government-directed lending boom last year weakened their balance sheets and increased credit risks in the financial system.

China's top three banks, Industrial and Commercial Bank of China, Bank of China and China Construction Bank have in recent months announced plans to raise up to 140 billion yuan in total by selling shares and convertible bonds, while the fourth-biggest lender, Agricultural Bank of China , is planning an initial public offering worth about $30 billion.

Hua Xia's shares have been suspended from trading since April 14, pending announcement of the fund raising plan.