KUALA LUMPUR/HONG KONG (Reuters) - Malaysian bank CIMB Group Holdings (CIMB.KL) has raised $1.1 billion through new shares to boost core capital, it said on Monday, as it takes on rivals in credit and equity markets at home and abroad.
Southeast Asia’s fifth-largest lender is bracing for rising demand for credit on the back of rapid economic growth in Malaysia and a pipeline of large initial public offerings in the country this year.
Its consumer and corporate loan businesses have also been growing at double-digit rates, fuelled by strong economic growth in southeast Asia, where it counts Singapore, Indonesia and Thailand as key overseas markets.
CIMB said it issued 500 million shares, or 6.08 percent of its enlarged capital, at 7.10 ringgit each through a private placement.
The placement was at the lower end of an earlier indicative price range of 7.10 to 7.25 ringgit, according to a term sheet seen by Reuters, against its last traded price of 7.30 ringgit.
“With the new capital we stand strong to face any future volatility in financial markets and can continue to grow our business at our desired pace,” Chief Executive Nazir Razak said in a statement.
CIMB’s core capital has lagged behind larger regional peers. Its Tier 1 ratio - a key measure of a bank’s financial strength - was 8.2 percent at the end of September, below local rival Maybank’s (MBBM.KL) 10.79 percent. DBS Group Holdings (DBSM.SI), southeast Asia’s biggest lender, had a Tier 1 ratio of 13.3 percent at the end of September.
The capital raising boosts CIMB’s Tier 1 ratio to 9.7 percent, the bank said.
“They are taking a dual direction, to invest in their home market as well as the overseas growth drivers. In order to continue both ways, the capital required is quite high,” said Chan Ken Yew, head of research at Kenanga Research in Kuala Lumpur.
Under CEO Razak, CIMB has boosted regional operations over the past decade and expanded its investment banking capabilities by acquiring parts of Royal Bank of Scotland’s (RBS.L) Asia operations outside Japan.
Last year CIMB became the only Asian bank to win a mandate to advise Warrnambool Cheese and Butter Factory Co WCB.AX, the target of a multi-billion three-way global takeover battle in Australia.
The CIMB share sale is the biggest in Malaysia since Maybank tapped equity markets with a $1.2 billion offering in October 2012, Thomson Reuters data shows.
Trading in CIMB, which has a market value of $17.3 billion, was suspended on Monday ahead of the announcement and will resume trade on Wednesday. Tuesday is a public holiday in Malaysia.
Bank of America (BAC.N), CIMB Investment Bank and Credit Suisse CSGN.VX were joint book runners for the share sale.
Additional reporting by Elzio Barreto and Umesh Desai in Hong Kong, Al-Zaquan Amer Hamzah in Kuala Lumpur and Saeed Azhar in Singapore; Editing by Miral Fahmy and David Goodman