Ping An Bank boosts capital with $2.4 billion private share sale

Tue Jan 7, 2014 11:21pm EST

Related Topics

* Bank raises funds from majority shareholder Ping An Insurance

* Chinese lenders under pressure to boost capital strength

* Bad loans expected to rise as economy slows

SHANGHAI, Jan 8 (Reuters) - China's Ping An Bank Co Ltd has raised 14.73 billion yuan ($2.43 billion) by selling stock to its main shareholder, becoming the latest lender to raise funds to meet new banking standards and to absorb an expected rise in bad loans.

Through the sale, Ping An Insurance Group raised its stake in the bank to 59 percent from 52 percent, the two firms said in exchange filings late Tuesday.

The purchase price on Dec. 30 of 11.74 yuan per share valued the bank at 1.12 times its book value on Sept. 30, the end of its latest reporting quarter, according to Reuters calculations.

Chinese banks are under pressure to increase their financial strength to meet tough conditions that the banking regulator began implementing last year in line with new global standards known as Basel III.

China's rules require mid-sized lenders like Ping An to maintain tier-one capital ratios of at least 6.9 percent by the end of 2014 compared with 6.5 percent last year.

Ping An Bank's ratio will rise to above 8.5 percent as a result of the share issue, the bank said, from 7.43 percent at September-end.

Many banks have announced fundraising plans aimed at boosting capital adequacy and strengthening their capacity to absorb an expected rise in bad loans as the economy slows.

China Merchants Bank Co Ltd raised more than $5 billion last year by selling stock to existing shareholders in Shanghai and Hong Kong.

At least 12 other listed banks have announced plans to raise about 425 billion yuan, largely through subordinate debt issues that count as capital under China's new rules.

Regulators have also started allowing banks to sell preferred shares, adding another fundraising option. ($1 = 6.0512 Chinese yuan) (Reporting by Gabriel Wildau; Editing by Christopher Cushing)

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