SINGAPORE Oversea-Chinese Banking Corp (OCBC.SI), Singapore's second-biggest lender, plans to raise $2.7 billion from existing shareholders to boost capital after it acquired Hong Kong's Wing Hang Bank Ltd, and said it may look at more fund-raising.
The plan, Asia's fourth-biggest equity capital raising this year, will lift the bank's capital comfortably above Basel III levels due to come into effect in 2019, but OCBC will still lag domestic rivals.
"Capital raising continues to be an option," Chief Financial Officer Darren Tan told reporters via video link from Hong Kong, adding that the bank may consider scrip dividends. OCBC Chief Executive Samuel Tsien said the bank could also look at non-core asset sales.
OCBC said it will sell 440 million shares at S$7.65 a share, a 25 percent discount to its last share price of S$10.20 on Friday. It will offer one rights share for every eight existing ordinary shares held.
Tan said the bank's common tier 1 capital ratio will be 13.2 percent after the rights issue. Once Basel III bank capital rules are applied, the bank's tier one ratio will be 10.2 percent - above the 9 percent required.
Macquarie analyst Thomas Stoegner said in a note to clients that OCBC's "pro forma" core equity tier 1 ratio - which takes into account the new capital rules - was below DBS Group Holdings (DBSM.SI) and United Overseas Bank (UOBH.SI) which have levels of more than 12 percent.
"The rights issue addresses around half of the pro-forma capital shortfall in our view," Stoegner noted.
OCBC took over Wing Hang Bank Ltd in a deal worth almost $5 billion, seeking a gateway to the Greater China region.
Tsien noted the Wing Hang deal will give the Singapore lender 120 branches in Hong Kong, Macau, China and Taiwan. Wing Hang has branches in five of the nine cities in the Pearl River Delta region in southern China, an area whose GDP is as large as Indonesia's GDP, he said.
Bank of America Merrill Lynch, HSBC and JPMorgan are handling the share sale for OCBC, it said.
OCBC shares were down 0.1 percent in late afternoon trade.
(1 US dollar = 1.2448 Singapore dollar)
(Editing by Edwina Gibbs)