UPDATE 1-China's AgBank plans up to $12.8 bln preference share issue

Thu May 8, 2014 5:58am EDT

Related Topics

* All of China's big four expected to issue preference shares

* Private placement deal is pending regulatory approval

* Deal would boost AgBank core tier 1 ratio as profit growth slows (Recasts, adds context, details of expected offerings by other Chinese banks)

HONG KONG, May 8 (Reuters) - Agricultural Bank of China said it would issue up to 80 billion yuan ($12.83 billion) of preference shares, the first of the country's big four lenders to unveil such plans to bolster their capital bases.

As an era of record profit growth draws to an end for Chinese banks, they are becoming increasingly thirsty for capital. New funds will help them sustain lending without falling foul of tough new global rules on capital adequacy ratios, a measure of how much capital banks hold in reserve against assets such as loans.

The Agbank deal would take the form of a private placement, the bank said in a filing with the Hong Kong stock exchange on Thursday. Following the issuance, the bank's tier 1 capital adequacy ratio would be boosted by 0.83 percentage point to 10.08 percent, it said.

All four of China's biggest banks are expected to issue preference shares of a magnitude similar to AgBank's proposed offering. Industrial and Commercial Bank of China, AgBank and China Construction Bank could issue 80 billion yuan, while Bank of China may issue up to 100 billion, according to Daiwa Capital Markets estimates.

The AgBank offering is pending approval by Chinese banking regulators. The lender said it will issue an initial tranche of up to half the approved total within six months of permission being granted.

"We believe the issuance of preferred shares will allow for an alternative fundraising channel without having a dilutive impact on existing shareholders, which should ease pressure on the bank sector's valuation," said analysts for Daiwa Capital Markets in an April research note.

Preference shares come with a greater claim on the company's assets than common stock, but do not offer voting rights. ($1 = 6.2343 Chinese yuan) (Reporting by Lawrence White; Editing by Ryan Woo)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.