SEOUL (Reuters) - The South Korean unit of Citigroup (C.N) will receive capital from its parent to lift its capital ratio, a source from the bank said on Friday, joining other banks in efforts to shore up their financial bases.
“We have a plan to replenish capital. Details will be announced early next week,” the source with knowledge of the plan said by telephone, declining to give the amount of fresh funding.
He asked not to be identified before the announcement.
Financial news outlet Yonhap Infomax reported Citigroup was set to inject about $400 million-$500 million into its local unit.
Banks across the region have been bustling to raise new capital as the deepening economic slump is expected to snowball bad loans and cut into profits.
In November, South Korean banks pledged to boost their capital ratios, mostly through subordinated debt issues, to 11-12 percent from an average of 10.79 percent at the end of September, which marked the lowest in 7- years.
The ratio for Citibank Korea slid to 9.50 percent according to Basel II guidelines, the lowest among seven major banks in South Korea.
South Korean regulators have further advised domestic banks to push their capital ratios above the pledged levels to secure room to lend more to cash-strapped companies.
The country’s top four lenders, led by Kookmin and Shinhan, plan to raise a combined 8 trillion won ($6.22 billion) by the end of this month via issues of subordinated debt and new share sales to their parent groups, according to Reuters calculation.
Citibank was spotted selling dollars in South Korea’s foreign exchange market to fund the capital increase, a dealer said, helping push the won to as strong as 1,274.80 against the dollar at one point.
The U.S. government became Citigroup’s largest shareholder in November in a bid to rescue the struggling firm. Citigroup has suffered more than $50 billion of credit losses and write-downs since the credit crunch began last year.
Reporting by Kim Yeon-hee, Additional reporting by Lee Kyong-ho; Editing by Jonathan Hopfner