CITIC Int'l to inject $321 mln into CITIC Ka Wah bank

HONG KONG, Nov 27 (Reuters) - CITIC International Financial Holdings Ltd (0183.HK: Quote, Profile, Research, Stock Buzz) plans to inject up to HK$2.5 billion ($321 million) into its banking arm, CITIC Ka Wah Bank, after Moody's downgraded ratings for the bank amid subprime bond woes.

CITIC International plans to obtain a loan for the injection to boost the capital of the Hong Kong-based bank and help its organic growth and expansion in China, it said in a statement.

"The new capital will strengthen the bank's core capital ratio and total capital adequacy ratio, which stood at 8.8 percent and 15.3 percent, respectively, as at June 30, 2007," it said late on Monday. Last week, Moody's Investors Service cut CITIC Ka Wah Bank's financial strength rating to D+ from C-, its deposit rating to Baa2/Prime-2 from Baa1/Prime-2 and its subordinated debt to Baa3 from Baa2 due to the bank's relatively large exposure to structured investment vehicles (SIVs).

The rating agency warned that "if current market conditions prevail, CITIC Ka Wah Bank could have to absorb impairment charges related to its SIVs possibly equivalent to a full year's earnings".

CITIC International said the bank's exposure to SIVs was smaller than Moody's estimation of some HK$4.6 billion investment in SIVs and other alternative investments.

The bank said it held about US$340 million in total investments in the capital notes of SIVs and had not increased its exposure in SIV investments in the past year.

In the portfolio, the bank exchanged US$120 million of capital notes in Victoria Finance Ltd, which recently completed a restructuring, with a US$120 million capital note issued by Farmington Finance Ltd, a fully funded vehicle.

The other three SIVs in which the bank holds capital notes have funding in place through to the end of 2007, and the company is aware of plans already being discussed as to the next steps to be taken, it said.

"Having taken into account all of the above comments, the company's results and preformance in the current financial year remain broadly in line with current market analyst expectations," it added.