Just over seven months after raising Rmb18.9 billion ($2.8 billion) from a Shanghai initial public offering, China Everbright Bank is thirsty for capital again and plans to sell 10.5 billion H-shares in a Hong Kong IPO to replenish its capital reserve, the lender said yesterday.
It is the second Chinese bank to announce fundraising plans this year. Last month, China Minsheng Bank, the country's seventh-largest lender that is listed in both Shanghai and Hong Kong, said it will raise Rmb21.5 billion ($3 billion) from an A-share placement to shore up its capital strength.
Everbright Bank's announcement came after the People's Bank of China (PBoC) said on Friday it will raise the bank reserve requirement ratio by 0.5 percentage points -- the second such move by the central bank this year and the eighth since the beginning of 2010.
The country’s 11th-largest lender aims to sell up to 10.5 billion shares in Hong Kong. The deal will come with an overallotment option to issue an additional 1.5 billion shares in case of strong demand, resulting in a total offering of up to 12 billion shares, the bank said in a statement posted on the Shanghai Stock Exchange (SSE) yesterday.
“The net proceeds from the H-share offering will be used to replenish the bank's core capital, lift its capital adequacy ratio and improve capabilities to minimise risks and maintain profits,” the bank said.
No details about the offering were given but the lender said it will select an appropriate time to complete the planned Hong Kong IPO within 18 months of obtaining shareholder approval for the offering. Shareholders will meet in Beijing on March 14 to vote on the plan.
“The authorities require H-share-listed banks to have a tier-one capital ratio of 10%. Everbright Bank is probably around 8% to 9% at the moment,” said May Yan, an analyst at Barclays Capital.
Everbright Bank's Shanghai-listed shares fell 1.5% at one point yesterday on worries of share dilution, but later recovered some of those losses and closed 0.25% lower at Rmb3.96.
There are currently nine mainland banks listed in Hong Kong. The maiden deal by a mainland lender in Hong Kong was Bank of Communications’ $2.16 billion IPO in 2005, while the most recent new share offering was Chongqing Rural Commercial Bank's $1.35 billion IPO in December.
A total of eight mainland banks have shares listed in both Hong Kong and Shanghai. Three of them -- Agricultural Bank of China, China Citic Bank and Industrial and Commercial Bank of China -- achieved this through a simultaneous IPO in the two markets.
The PBoC said new loans issued by the country's lenders reached Rmb1.39 trillion ($203.5 billion) last month, compared with the Rmb379.8 billion issued in December last year.
Everbright Bank sold 6.1 billion A-shares in a Shanghai IPO in August last year that was arranged by China International Capital Corp, Shenyin & Wanguo Securities and China Jianyin Investment Securities.
The shares were fixed at Rmb3.10 apiece, which was the top of an indicated range that went down to Rmb2.85. The price represented a price-to-earnings ratio of 16.4 times.