(Corrects price in paragraph 11 to remove "billion" yuan per
* Bank completes $5.7 billion fundraising plan
* New stock sold to existing shareholders in Shanghai, Hong
* Cash needed to meet new global rules on capital buffers
* Chinese bankers expect bad loans to rise as economy slows
By Gabriel Wildau
SHANGHAI, Sept 4 China Merchants Bank
, the country's sixth-largest lender,
completed a long-planned share offering on Wednesday, raising
27.5 billion yuan ($4.49 billion) from its Shanghai
shareholders to meet new capital adequacy requirements.
The rights offer made up the bulk of a broader $5.7 billion
fundraising plan that includes an HK$ 7.9 billion ($1.04
billion) share sale in Hong Kong, making the combined plan the
world's second-largest equity offering this year.
China's banking regulator began implementing the tougher
rules on capital buffers at the start of 2013 in line with new
global standards known as Basel III.
The rules require the country's biggest banks to raise their
capital adequacy ratios to 9.9 percent by the end of next year
and 11.5 percent by 2018. Tier-one ratios must be 8.9 percent by
end-2014 and 10.5 percent by 2018.
China's securities regulator approved CMB's A- and H-share
fundraising plans in July and August, respectively, two years
after the bank first submitted them.
China's mainland equity markets have been closed to initial
public offerings since last October as part of efforts to crack
down on fraud and buoy demand for existing shares amid poor
market performance in recent years.
Mainland banks are expected to raise at least 210 billion
yuan in capital by 2015, though most have opted to issue
loss-absorbing subordinate debt rather than equity.
China has implemented Basel III aggressively, as it aims to
prepare its banks for the rise in non-performing loans that
regulators and bankers say they expect as China's economy slows
and credit costs rise.
China's leadership is aiming to wean the country off a
growth model that relies on cheap loans to fuel investment.
CMB's capital adequacy stood at 10.72 percent at end-June,
down from 11.41 percent at end-2012, while its tier-1 ratio was
8.00 percent, down from 8.34 percent, the bank said in its
half-year earnings report. Both figures are the second-lowest
for Hong Kong-listed mainland banks.
The bank sold shares at 9.29 yuan per share in Shanghai and
HK$ 11.68 in Hong Kong, equal to per-share net asset value at
end-2012 but a discount to its 9.84-per-share book value at
In Shanghai, 96.4 percent of existing shareholders
participated in the rights offering, the bank said in a Shanghai
stock exchange filing. The result of the Hong Kong sale will be
disclosed on Sept. 26, it said in a Hong Kong filing.
The bank said last month it would use the funds to boost
capital and fund expansion. Analysts say CMB is nimbler and more
service-oriented than larger rivals like Industrial and
Commercial Bank of China , but the bank
faces competition from small lenders like Hua Xia Bank
and Minsheng Bank .
China's banks reported first-half earnings last month, which
showed slower profit growth but returns on equity that remain
among the highest in the world.
CMB shares closed at HK$ 14.4 in Hong Kong on Wednesday,
down 0.4 percent. For the year, shares have lost 13.6 percent in
Hong Kong. Shares in Shanghai last closed at 10.60 yuan in Aug.
27 and have been suspended since then.
For the year, Shanghai shares have lost 22.4 percent,
compared with a loss of 7.0 percent for an index of
($1 = 6.1201 yuan)
($1 = HK$ 7.7553)
(Additional reporting by Xu Yong,; Editing by David Cowell)