| HONG KONG/SHANGHAI
HONG KONG/SHANGHAI Feb 28 Shareholders of China
Minsheng Banking Corp Ltd have rejected a
proposal designed to boost the bank's equity capital, leaving
management in need of another plan to meet strict new capital
China's largest non-state bank by assets had proposed
lowering the conversion price of convertible bonds to encourage
holders to swap their bonds for shares, thereby raising its
capital adequacy ratio.
That would have left Minsheng in a better position to meet
new capital requirements that the banking regulator began
phasing in last year in line with global rules known as Basel
But shareholders would have seen the value of their share
holdings diluted by the proposal and so voted it down late on
Thursday. Such rejections are rare in China, where most banks
The "result reminds the bank's management that it needs to
focus on the efficient use of capital as it expands. It should
not invest blindly or operate as freely as it did before," a
representative of a large shareholder told Reuters by telephone.
Minsheng had roughly 20 billion yuan ($3.26 billion) worth
of convertible bonds outstanding after less than 0.1 percent had
been swapped for shares as of the end of last year.
Shares of Minsheng have fallen about 36 percent since early
last year on concern over shrinking interest margins and rising
bad debt, reducing the attractiveness of conversion. They closed
down 1.5 percent in Hong Kong on Friday.
Even if the bank reduced the conversion price, bondholders
might not have bitten, said the representative of a large
shareholder, who is not authorised to speak publicly on the
matter and so declined to be identified.
"We think that this method will not necessarily raise
capital," said the representative.
The outcome of the vote reflected the sentiment of numerous
shareholders and not just the sentiment of those with large
holdings, the representative said.
With China's economic growth slowing and demand for new bank
shares waning, banks can no longer expand their balance sheets
as fast as they once did, said the representative.
"The bank's management should not use the (capital) rules to
scare itself, or scare investors," the representative said. "The
(conversion price) plan was hastily made and not thought
China's banking regulator is implementing the Basel III
rules by requiring smaller banks to have a minimum tier-1
capital ratio of 8.5 percent, or 10.5 percent of total capital,
Minsheng's tier-1 and total capital ratios were 8.18 percent
and 10.15 percent, respectively, at the end of September.
A spokesman for Minsheng declined to comment.
($1 = 6.1284 Chinese Yuan)
(Addional reporting by Xie Heng in BEIJING and Shanghai
Newsroom; Editing by Christopher Cushing)